, 



V 



LiBRARY OF CONGRESS. 

UNITED STATES OF AMERICA. 



Chap. 



.„,.. Shelf. t 

PRESENTED BY. 









THE 



THREE SYSTEMS 



OF* 



Life Insurance 



EMBRACING 



I, The Level Premium System. 
II. The Natural Premium System. 
III. The Assessment System. 



BY 



MERVIN TABOR, 

IvATE ACTUARY OF THE INSURANCE DEPARTMENT OF ILLINOIS. 



NEW YORK AND CHICAGO : 

THE SPECTATOR COMPANY. 

1891. 



+ & 










COPYRIGHT BY 

THE SPECTATOR COMPANY, 
1891. 



>•■----> o 



PUBLISHER'S PREFACE. 



The Spectator Company having purchased from Mrs. Tabor, 
widow of the author of The Three Systems, the copyright and electro 
plates of this work, issue the Seventh Edition to meet the demand 
that has been made for it. In doing so the publishers desire to state 
that the text of the work explanatory of The Three Systems of Life 
Insurance remains unchanged from the last edition issued by the 
author. Some revisions have been made in the statistics of companies 
operating upon the different systems to bring them down to date, and 
in the plans of one or two companies that have been modified since 
the date of the last edition. Otherwise, the work is identical with 
previous editions. The greater portion of this edition is printed from 
the plates prepared by the author, and are in nowise changed as to 
matter, style, or typography. 



AUTHOR'S PREFACE TO THE SIXTH EDITION. 

The degree of favor with which " The Three Systems of Life 
Insurance " has been received is indicated by the fact that already 
five large editions have been exhausted. 

So appreciative have been the comments of the insurance press, 
and so gratifying the letters received from gentlemen of the highest 
repute as Life Insurance Experts, that the author takes this occasion 
to make his profound acknowledgments for the kindness shown his 
work. 

More than ever, he is convinced, that were this little book the only 
result of his life's work, he would not have lived entirely in vain. 

It is not claimed that all has been said that might have been ; in- 
deed, the great labor has been to condense and simplify, not to 
expand. However, as perfection is never reached by human mind or 
pen in any department of thought, and as the highest excellence is 
only attained by successive steps, the author now presents this Sixth 
Edition, carefully revised and somewhat increased in size and scope. 

The author has given his best thoughts to this work, without any 
bias whatever, being desirous of doing evenhanded justice to each 
system. Whatever of technical knowledge he may have gained in 
the special field in which he has labored for a period of nearly thirty 
years has been drawn upon for the public good. 

MERVIN TABOR. 

Chicago, 1888. 



no/ 



CONTENTS. 

[Full Index will be found in the last pages of the book.] 

Page. 
Introduction 7 

CHAPTER I. 

Fire Insurance. — Life Insurance. — The Law of Mortality. — 
How Mortality Tables are made. — The Two Tables used 
most extensively in America 17 

CHAPTER II. 

Actuary.— Assets. — Brokerage. — Commissions. — Stock Compa- 
nies. — Mixed Companies. — Contribution System of Divi- 
dends. — Cash Dividends. — Reversionary Dividends. — Ex- 
pectation of Life. — Forfeiture. — Lapse. — Loading, — Loss. 
Mortality 22 

CHAPTER III. 

Policy. — Single-Payment Life. — Five-Payment Life. — Ten-Pay- 
ment Life. — Fifteen-Payment Life. — Twenty-Payment 
Life. — Ordinary Life. — Term Life. — Renewable Term 
Life. — Quarterly Renewable Term Life 27 

CHAPTER IV. 

Endowment Insurance. — Ordinary Endowments. — Limited Pay- 
ment Endowments. — Endowment Compared with Term 
Insurance. — The Investment Element. — The Insurance 
Element 31 

CHAPTER V. 

» 
Tontine Insurance. — Semi-Tontine Insurance. — Senate Reso- 
lution No. 100 of the Ohio Legislature. — A Committee of 
Investigation. — Report of the Committee. — Lapses of Ton- 
tine as Compared with Non-Tontine Insurance — Dividends 
on Tontine and Non-Tontine Policies. — Premiums. — 
Premium Notes. — Surplus — Value of a Policy. — The Re- 
serve. — Abstract of Net Values. — Life Insurance Failures. — 
Life Insurance Expenses 39 

CHAPTER VI. 

The Level Premium System. — Its Distinguishing Characteristics. 
— Requisites for Soundness and Permanency. — Analysis of 
a Level Premium. — The Reserve Element. — The Mortality 
Element. — The Expense Element. — Sources of Dividends. — 
Lapses and Forfeitures. — Cash Surrender Values, etc,, etc.. 59 



CONTENTS. 



CHAPTER VII. 



Classification of the Level Premium Companies. — The Massa- 
chusetts Non-Forfeiture Law of 1880. — Letter from Elizur 
Wright and Massachusetts Life Companies. — Five Examples 
Illustrating the Workings of the Law. 71 

CHAPTER VIII. 

The Non-Forfeiture Law of Maine.— /The Non-Forfeiture Law 
of Michigan, as Amended in 1881. — Ten-Year Renewable 
Term Policies. — Rates at all Ages. — Actual Results 84 

CHAPTER IX. 

The New York Insurance Law of 1880. — The Iowa Insurance 
Law with Reference to Reserves. — An Assumed Example of 
a Tontine Policy. — Results of Matured Tontine Policies. — 94 



CHAPTER X. 

The Natural Premium System. — Its Distinguishing Character- 
istics. — Requisites for Soundness and Permanency. — The 
Elements of a Level Premium Compared with the Elements 
of a Natural Premium. — Uniform Per Centum Loading Dis- 
cussed. — Sheppard Homans' Plan. — The Life Indemnity and 
Investment Company. — Life Insurance Law. — Example of 
Bond. — Kansas Mutual Life Association. — Rates 130 

CHAPTER XI. 

The Assessment System — Its Distinguishing Characteristics. — 
Requisites for Soundness and Permanency — The Fouse 
Plan, as operated by the Fidelity Mutual Life Association. — 
Equation Rate of this Plan. — Notations. — Formula. — Cor- 
porate Powers, By-Law and Contract Provisions.— The 
Harper Plan, as operated by the Mutual Reserve Fund Life 
Association. — The Bankers' Life Association of Des Moines, 
Iowa ; 159 

CHAPTER XII. 

Synopsis of the Massachusetts Law of 1885 on Assessment In- 
surance, by the Hon. John K. Tarbox. — '* Co-operative 
Business," by Hon. John A. McCall, Jr., Supt. of the New 
York Insurance Department. — Resolutions of the Executive 
Committee of the Mutual Benefit Life Associations of 
America. — Co-operative Insurance, by the Hon. Ephraim 
Williams, Insurance Commissioner of Connecticut. — His 
Remarks on the Grouping of Different Ages for purposes of 
Assessments- 199 

CHAPTER XIII. 

Article on Interest. — Interest Laws of the States and Territories. 
— Penalties tor Violation of the same. — Explanation of the 
Tables. — Tables , 205 



INTRODUCTOBY. 



INTRODUCTION. 

The idea of publishing the work here presented did not sug- 
gest itself until much of the material that it contains had accu- 
mulated for the private use of the author. 

Since the organization of The Bureau of Life Insurance 
Information, in 1881, many letters have been received from 
different localities throughout the United States and Territories, 
and from Canada, asking for information. These letters cover a 
wide range of inquiry upon subjects involving the elementary 
principles of Life Insurance. To answer these much time and 
labor have been required. The following, copied at random 
from a few of these letters, will convey an idea of their general 
scope: 

1. What is a Mortality Table, and where can I obtain one? 

2. What is the difference between the reserve and the surplus of a 

company? 

3. Why is the dividend on a Life Policy larger the tenth, than it is 

the fifth, year? 

4. / have one policy that was taken out nearly thirty years ago, but 

the dividend this year is not so large as it was ten years ago. 
I have another that is only six years old, and the dividend has 
increased every year. Why is this? 

5. Why can't Life Insurance be done the same way that Fire In- 

surance is? 

6. Please explain Endowment Insurance. 

7. What is Tontine Insurance? 

8. What is meant by the expression, " Actuaries' 4 per cent"? 

9. Please explain the new Massachusetts' Non- Forfeiture Law. 

10. What do you think of the Homans plan of Insurance? Isn't 

it Assessment Insurance in a new dress? 

11. Which is the best Assessment Company? 

12. An agent tells me that the New York Non- Forfeiture law com- 

pels all New York companies to pay a definite amount, in 
cash, for a policy after it has been running three or more 
years. Please explain this, How does it differ from the 
Massachusetts' law? 



8 INTRODUCTORY. 

13. Is there any good Assessment Company that issues Endowment 

Life Insurance policies? 

14. What is meant by " The Expectation of Life" a phrase used 

so often by Life Insurance men? 

15. What are the sources of dividends in the " Old Line" com- 

paniesf Why can't we pay less for insurance and not receive 
any dividends? 

16. I want $10,000 life insurance to be paid for in ten years, as an 

estate to go to my wife and children after my death. I also 
want $10,000 payable to my boy, now six years old, when he is 
twenty-one, or to a trustee for him should I die before he does; 
and I want $10,000 for the next ten or fifteen years, the cheap- 
est insurance that can be had consistent with security. Please 
give me the information necessary for an intelligent selection 
of companies, and send bill for services. 

17. An agent has been in to see me several times trying to insure 

me for $10,000 on what he calls the " The Reserve Addition" 
plan, or " The Accumulation" plan, I think it is. I am to 
pay for it in ten years, and he says that at the end of nine- 
teen years I will receive the $10,000, in cash, if I live until 
then, but if I die before that time my wife will receive the 
whole amount. Bo you think a company can do such a thing? 
Please ansicer in detail and send your bill. 

18. If 1 insure for $10,000, and die the first year, how can a com- 

pany afford to pay my wife and children the $10,000? I don't 
understand it. Please explain and send charges. 
Id. What is an actuary? Do they have actuaries in fire insur- 
ance companies? 

20. I noticed in a recent issue of a Chicago paper your card adver- 

tising a Bureau of Life Insurance Information. As I 
am largely interested in Life Insurance I naturally desire to 
gain such information concerning this interest as may be of 
value to me. Tour reply intimating what you may have to 
offer will be appreciated by me. Enclosed find stamp. 

21. How can an Assessment Company safely issue Endowment 

policies? 

22. What are Reversionary Additions or Dividends? 

23. What is the difference between "Old Line " insurance and 

Assessment insurance? Are not the principles upon which 
they are based the same? 



INTRODUCTORY. 9 

&£. Is there any good Assessment Company that makes assess- 
ments only three or four times a year, at stated fixed dates? 
Please reply. 

25. Why are the "Old Line" called "Level Premium'' 

companies? 

26. Why is it necessary that so many of the Mutual " Old Line" 

companies ham so much money "in reserve" as they call it? 
If they are Mutual, why don't they pay back to their members 
this money, and not pile it up to be preyed upon, perhaps, by 
avaricious officers? I don't understand it. Please explain. 

27. Wliat is a " natural premium "? 

28. I have had a policy in the - Company for nearly sixteen 

years, and I asked what they would pay me for it, in cash, 
and they won't pay a red cent! They say that they are selling 
insurance, not buying it. (This gentleman describes his 
policy — tells how much he has paid on it, in cash, and 
wants to know if it is worth anything.) 

The above extracts from a few of the thousands of letters re- 
ceived, during the last four years, sufficiently indicate the eager- 
ness with which the general public are seeking impartial and 
reliable information on the subject of life insurance. One 
object, therefore, in the publication of this book, was to more 
fully supply this demand, and, at the same time relieve the 
office, possibly, from a large amount of correspondence on 
certain topics. Nearly every question given above is answered 
in this book more completely than could be done by letter, and 
at much less expense to the correspondent; besides it gives 
much additional information that could not possibly be com- 
municated in one or fifty letters. 

The book has been written from an absolutely impartial 
stand- point, as the reader will readily perceive in the perusal of 
its pages, and therein consists one of its principal merits. 

The Three Systems of Life Insurance find expres- 
sion in the different conditions, tastes and surroundings of the 
insured and the insurable, in every community. They exist, be- 
cause there is a demand for them. 

One person desires cheap insurance combined with Invest- 
ment. The investment is the principal idea. He would not take 
the insurance, no matter how cheap, without the investment; but 
to secure the investment, he will accept the insurance. This man 
represents a large class in every populous community. The 
Level Premium System, with its Endowment, Tontine, and 
Semi- Tontine policies, by whatever names designated, supplies 
the demand. 



10 INTRODUCTORY. 

Another wants Life Insurance as an estate. He thinks that 
every one who has a family to support, ought to indemnify them 
against possible loss, and consequent suffering, by his death. 
He does not regard life insurance as an investment. Indemnity 
first ; an estate, afterwards, are the leading ideas. He be- 
lieves that he can take care of his family while he lives, 
and, if the payments be limited to ten, fifteen or twenty 
years, he can pa} r for such a policy during the productive 
period of his life. He wants a good policy contract; one 
that will be Non-Forfeitable and incontestable, after a 
certain number of years. If he were to become a lunatic 
after the payment of several premiums, and were to commit sui- 
cide, perhaps, he does not want to involve his family in a lawsuit 
with a rich corporation. If from reverses in business he were to 
become despondent, and dissolute in his habits, he does not want 
his leserves in the company's possession confiscated. He wants 
a policy-contract — and he will accept no other— that, after the 
payment of two or three years' premiums, in cash, will be, with- 
out further stipulation or negotiation, good for a certain amount 
of paid-up insurance covering the whole period of life; or, one 
that will be extended for its full face value until the reserve has 
been exhausted in payment for such extension. Dividends with 
him are of secondary consideration. This man represents a veiy 
large class, and its demands must be responded to. If a selection 
of companies be wisely made, The Level Premium System, 
with its 10, 15, or 20 annual payment life policies, fully supplies 
the demand. 

There is another who represents a different class from 
those already mentioned, He wants life insurance; believes in it, 
but thinks that he can handle his own money better than any in- 
surance company can handle it for him. He can make his own 
investments, as he expresses it. He wants pure insurance, for a 
definite amount guaranteed in the policy, without any " ifs" or 
"provideds" about it, and he wants it for only the productive 
period of his life, and it must be cheap. He prefers to pay for 
it, quarterly, in advance. When he pays his premium, he 
wants to know how much he is paying for insurance; how mucli 
for expenses, and how much for contingencies. He is willing to 
pay an equitable amount, from quarter to quarter, for a definite 
amount of insurance, including expenses and contingencies, but 
not one penny, additional, to accumulate in the treasury of the 
company, and that can not be used, if necessary, in payment of 
current death claims. He is willing to pay for such insurance at 
an increasing cost from year to year, as age increases. To this 
demand from a very numerous class, The Natural Premium 
System responds. 

And there is yet another who represents an entirely different 
class. Neither of the two systems named conforms to either his 



INTRODUCTORY. 11 

ideas or his purse. He wants to pay for a thing when lie gets 
it ; not before. The idea of fifty or a hundred, or several nun 
dred individuals, more or less, associating themselves together in 
a kind of society, or brotherhood, and, whenever one of their 
number dies, each of the remaining members to pay a certain 
sum named to the bereaved famity, this plan of insurance, as 
he calls it, seems to commend itself to him. They may all be 
engaged in the same occupation, conductors, engineers, &c, &c; 
or, they may be employed in the different departments of the 
same corporation, or of similar corporations in different parts of 
the country ; or, they may be members of the same secret society, 
board of trade, or produce exchange, and, although no definite 
sum is named to be paid to the widow and children of a deceased 
brother, yet each contributes what he had pledged, when the emer- 
gency occurs. Such societies exist in response to the demands 
of a very large class of respectable people. They are called 
assessment societies. ' It is true that not one scientific prin- 
ciple upon which sound life insurance is based— except that of 
association— enters into the organization of this kind of socie- 
ties ; but in thousands of instances the contributions, thus made, 
have paid all the funeral expenses, and a very considerable 
sum has been left with which to provide shelter, food, fuel, and 
clothing for the bereaved family ! Who can have a heart so 
pulseless and cold as to not feel glad that the otherwise shelter- 
less, homeless, penniless, widowed mother, and the fatherless 
children have thus found relief, though it be but temporary, 
through the benefactions of these most primitive assessment 
societies ? In some of them are to be found well to-do men. 
Many of them are insured in other organizations, and in 
the Level premium companies, but they have become 
members of these societies, mainly, in a great many instances, 
to help and encourage those who are not able to pay for any 
other kind of indemnity. Among them are foremen of the . 
different departments of large manufacturing establishments, 
and, not infrequently, the manufacturers and the railroad 
officials themselves. 

There is another class of assessment societies that has 
been organized on quasi scientific principles. A mortality table, or 
the rates of some Level premium company, was consulted; but, 
in a large number of cases, the leaders who took the initiative 
in the organizations, were not sufficiently familiar with the sci- 
ence of life insurance to know how to utilize them. The mem- 
bership is separated into classes, according to their ages, each 
class including several ages. "Once in a class always in the same 
class/' is their motto, and the assessment for each death is 
never to be increased. This distinctive feature is kept well in 
the foreground as one of the reasons for becoming a member. 
"Your assessment will never be increased." The reason given 



12 INTRODUCTORY. 

by one of this class, for uot increasing the rate of assessment, 
as the age increases and consequently the cost, is the following : 

" And as they advance in age the cost to a member does not in- 
crease, for every death in the ranks is replaced by a vigorous young 
member, and the average mortality forever remains about the same." 

The organizers of this class of societies did not seem to com- 
prehend the fact that when a member was classified at age 60, 
for instance, with a permanent rate of assessment at, say, $1.80 
for each death, he might live to be 75, when the cost of carrying 
him would be more than three and a half times as much as when 
he entered the society. It is at this class of societies that the 
Level premium companies have fired their most effective missiles, 
and with the most fatal results* Hundreds of them have run for 
a few years and then retired, the direct results of unscientific 
rating. Such societies may be found all over this country, strug- 
gling to perpetuate an existence. Their efforts remind one of an 
attempt to build a high tower, at an angle of thirty-three and 
one-third degrees off the perpendicular. Such a tower may be 
built, quite high, if the base be broad ; but, if continued, after a 
time the center of gravity will fall outside the base when the 
structure will tumble ; not necessarily because the workmen were 
inefficient, nor that the bricks and mortar were of bad materials, 
but because they were building against the great law of gravita- 
tion. It might be propped up for a time, and the work of con- 
struction be continued, but eventually the structure will fall to 
the ground, a shapeless mass of bricks and mortar. Thus has it 
been, and it always will be, with this class of assessment socie- 
ties. When one of these has been in existence long enough for 
its center of gravity to fall outside its base, it has tottered, 
reeled, and then fallen to the ground. They have fallen like 
dead leaves of the forest before the autumnal blasts ! There is 
nothing known in the whole range of life insurance mathematics 
and experience that can compensate for such unscientific rating. 
New blood can not do it. It may postpone the day of retribu- 
tion, for several years, even, but it is sure to come. It is the pen- 
alty for violation of the great law of mortality, that pervades the 
entire human family. 

During the last ten years a few scientific men have been inves- 
tigating the subject' of assessment insurance. These, together 
with others who possess large business capacities, have wrought 
a wonderful improvement in the system, as a system. The 
question has finally taken shape in the Convention of Mutual 
Benefit Life Associations of America. This convention, 
at its last session, adopted a series of resolutions which resulted 
in the appointment of L. G. Fouse, Esq., of Philadelphia, Pa., 
to prepare a standard of rates. Through the politeness of this 



INTRODUCTORY. IS 

gentleman, proof sheets of his report have been placed at the 
disposal of the author, portions of which will be found in the 
following pages : 

Under the existing insurance laws of the States, no assessment 
company or society can absolutely guarantee payment of the full 
face value of its certificate without making itself liable for the 
same reserve, from year to year, as is required under the Level 
premium system. As a matter of fact it cannot guarantee 
any, definite sum, in dollars and cents, without assuming a cor- 
responding liability of reserve. And this is as it should be. 
These societies may be able to pay the full amount named in 
their policies or certificates, and some of them have done so, 
since date of organization, but they cannot agree to do so, in their 
policy contracts, for reasons stated above. The question before 
the National Convention above alluded to, seems to be, substan- 
tially this: How can ice grade our rates and adjust our machinery 
so as to pay the full face value of our certificates without being liable 
for Level premium reserves? If the report of Mr. Fouse be 
adopted, by the National Convention, assessment insurance will 
have made a giant stride in the right direction. 

It is not the province of this work to advocate any one system 
of life insurance to the exclusion of the others. Its purpose 
is to portray the characteristic features of the three systems, 
and to point out the requisites for soundness and permanency 
as dictated by scientific and recognized business principles. No 
comparisons are made except to define technical terms, and to 
illustrate principles. The examples of real policies used quite 
freely are for the sole purpose of illustration, and, in order to 
avoid the very appearance of favoritism the names of the com- 
panies that issued them, and, also, of the persons insured by 
them, are purposely omitted. 

Considerable space is occupied in explaining the Tontine, 
and Semi-Tontine forms of insurance, under The Level Pre- 
mium System, and the more scientific forms of The Assessment 
System, because there seems to be at the present time, a demand 
for unbiassed and reliable information on these subjects. 

Tontine insurance has been vigorously assaulted through the 
leading press, east and west. Mr. Wolcott, of the Ohio Senate, 
expresses it in the preamble of his resolutions, calling for an in- 
vestigation of the subject, as follows: 

"Whereas.— Complaints for several years past have become 
general in Ohio, against the inequitable and unjust plans and 
methods of the Tontine insurance business as conducted by such 
companies foreign to Ohio ; and, 

" Whereas. — The leading journals of this and other States 
have recently made startling exposures, if true, of such plans 
and. methods, which are most unjust to policy-holders in su h 
companies ; and 

"Whereas. — Legislation seeking to arrest abuses and to protect 
the people of Ohio has been instituted by this general assembly; 



14 INTRODUCTORY. 

now, therefore, for the purpose of aiding such legislation and 
furnishing necessary information to the insurance department of 
Ohio as a basis for future legislation, Be it Resolved, cfcc. , &c" 

The resolutions, in full, as well as the committee's report after it 
had completed its examinations, may be found in the following 
pages : 

Considerable space has also been given to the discussion of 
the Massachusetts' Non-Forfeiture law of 1881. There seems to 
exist a difference of opinion with reference to the cash-surrender 
value feature of this law. A correspondence was therefore had 
with all the Massachusetts companies, and with the Hon Elizur 
Wright, with reference to that particular feature of the law. 
This correspondence is both interesting and instructive, and it 
has been given, therefore, to the readers of this book, together 
with several assumed examples of policies illustrating the general 
features of the law. 

As this book has been written mainly for the public in gen- 
eral, extreme care has been exercised in the use of technical 
terms. If forced to use them they have either been fully de- 
fined in preceding pages, or they are explained where used. Such 
expressions as Actuary, Reversionary Dividends ; Actua- 
ries' 4 per cent.; American 4 per cent.; Net Value of a 
policy ; Legal Reserve ; Tontine, Semi-Tontine, &c, &c, 
are defined in their appropriate places. 

The attention of the reader is called to the analysis of 
Endowment Insurance, in Chapter IV, commencing on 
page 31, The Endowment is a very popular form of insurance, 
because it provides indemnity in a double sense ; indemnity to the 
family or other beneficiary, in the event of the death of the in- 
sured within a -specified period of time— usually ten, fifteen, 
twenty, or twenty-five years— and indemnity against possible 
want and suffering at some future time growing out of financial 
embarrassment. Much the larger portion of the payments made 
on an endowment policy is guaranteed to earn compound inter- 
est, whether the insured die during the endowment period or 
live until its expiration. This subject is fully illustrated by 
assumed and actual examples of policies. 

The article on Life Insurance Failures, page 54, taken from 
a pamphlet entitled' "Life Insurance," &c, published by the 
Globe Newspaper Company, Boston, is worthy of careful 
perusal. 

The Article on Life Insurance Expenses, page 56, by which 
the expenses of life insurance companies are compared with 
those of fire insurance, and railroad corporations, will be a sur- 
prise to those who are not already familiar with the facts. 

Chapter VI, page 59, commences the analysis of The Three 
Systems of L'fe Insurance, beginning with the Level 
Premium system. In this and the following chapters the 



INTRODUCTORY. 15 

distinguishing characteristics of the Three Systems are 
discussed, together with the requisites for soundnesss and 
permanency. The reserve in the Level Premium System; the 
reserve in the Natural Premium System, and the reserve in the 
Assessment System, are, each, plainly defined, so that any one 
of ordinary intelligence may not only understand them, but also 
detect their differences. The reserve in The Level Premium 
System is entirely different from that in either of the other two 
systems. It means accumulation It cannot he used in payment 
of current death claims. It constitutes more than ninety per 
cent, of the entire assets of all The Level Premium Com- 
panies. The reserve on a policy in The Natural Premium 
System is at its maximum at the beginning of a policy year, and 
entirely disappears at the end of the year. It is all used in pay- 
ment of death claims during the year, but it must be used gradu- 
ally. In The Level Premium, and The Natural Premium 
Systems, insurance mathematics and insurance laws define the 
nature and prescribe the amount of their respective reserves. 
The mathematical and legal tests are rigidly applied to all policies, 
in force, at least once every year, by the Insurance Departments 
of the several States in which these companies are doing busi- 
ness. But the reserves in The Assessment Companies are en- 
tirely voluntary on the part of the societies themselves . They 
can provide for a reserve, as the better class of them do, or not. It 
can be used in payment of current death claims, at any time and 
in any amount, even to the entire exhaustion of the fund itself. 
There is at present no statute on the subject. 

Not only are the functions of these different kinds of reserves 
discussed in the chapters alluded to, but also the other elements 
entering into the formation of a level premium. 

The Tables, some twenty five in number, are a very prominent 
and useful feature of the book. The Actuaries', and the American 
Experience Tables, are given in full, with additional columns, in 
each, showing "Per cent, of Deaths to the Living"; "Expectation 
of Life" ; "Level Annual Premium to Insure $1,000 for Life"; 
and " The Natural Premium to Insure $1,000, one year — ages 
10 to 100, in the Actuaries', and 10 to 96 in the American. In 
audition to the usual compound interest tables, will be found 
several new ones, and also a table showing the amount of $1 per 
annum, for 50 years, at simple interest. 

The several articles on Interest ; Mortality ; How Mor- 
tality Tables are Constructed ; the Reserve Element, 
The Mortality Element, and The Expense Element of a 
Level Premium; The Sources of Dividends, and The Sev- 
eral Non-Forfeiture Laws of different States- together 
with other valuable information, constitute a popular treatise 
on the subject of life insurance, for which there has existed, 
for a long time, an increasing demand. 



CHAPTER I. 



Fire Insurance. — Life Insurance. — Man as Productive Capi- 
tal.— That Business Block.— The Successful Capitalist. 
—The Young Business Man.— The Law of Mortality.— 
How Mortality Tables are Made.— The Two Tables 
Used Most Extensively in America. 

Fire Insurance is protection against loss by fire, and it is 
based on the productiveness of the property insured — present or 
prospective — and the possibility of its destruction by fire. 

Life Insurance is protection against financial loss by death, 
and it is based upon the productiveness of the person insured — 
present or prospective — and the absolute certainty that he will 
die. 

A healthy body, a strong will, an active brain, and a natural 
aptness for business are the most productive property in the 
world. It has been said that when time was young, only two 
human beings lived on this earth. They lived in a garden, and 
fig leaves were their clothing. There were no business blocks, 
no railroads, no banks, no palatial residences, no trade, no com- 
merce, no money, no art, no science, no culture — no material 
wealth. All of these have since been produced by the brain of man. 
One generation after another has lived and passed away, each 
contributing something to what now constitutes the wealth of 
the world ! One hundred years hence every man, woman and 
child now living will be dead. The exceptions only prove the 
rule. Man, truly, is very productive, and there is nothing more 
certain than that he will die. 

Your annual income on that business block is $20,000, more 
or less. You keep it well insured. You even have the rental 
insured. Not because if it were to burn your family would be 
paupers, or that you would experience other than slight incon- 
venience from it. It is productive property, liable to burn, and 
it is business like to protect such property. If you owned a 
thousand such blocks you could assume the risk, yourself; but 
you own but one block, and you can no more afford to carry the 
risk on one block than you can afford to carry one letter to San 
Francisco for two cents, The companies can carry the risk be- 
cause they are carrying the same kind of risks on thousands of 



18 THE THBEE SYSTEMS 

other blocks, and their receipts from all pay the losses on the few 
that burn, and there is still a margin left for profit. 

Your block earns a handsome income. You produced the 
block. Which is the more valuable property, you or the block? 
Which is more liable to perish ; the block by fire, or you by 
death? Which would be attended with the more disastrous con- 
sequences, in a strictly financial sense ; the destruction of the 
block by fire, or your death, in the next thirty days? Would the 
destruction of the block, uninsured, impair or incumber the value 
of your other property? With no insurance on yourself, would 
not your death, within the next thirty days, impair the value of 
your estate at least twenty-five to fifty per cent. ? The average 
duration of a class of lives is certain, but there is no certainty of 
the duration of one life. When you have your buildings and mer- 
chandise insured, you protect yourself against what may occur ; 
but, when you have yourself insured, you protect jour family 
against what must occur. Fire insurance is protection against a 
possible calamity; but life insurance is protection against an 
absolutely certain calamity. 

One may possess those very rare and indefinable qualities of 
mind that always insure success. Everything he touches changes 
to gold dollars and a great many of them. When he purchases 
stocks, they are at the lowest; and when he sells, they are as 
mysteriously at the highest Under his magic touch wealth 
increases, he hardly knows how, so natural is it for him to con- 
trol the wealth producing elements that surround him. When 
his plans ripen, they stand out in bold relief, emphatically his 
own, and are tenaciously carried out to a generally successful 
issue. He seems to be impelled by a force which he has no 
power or inclination to resist. He loves to watch the mental ma- 
chinery within, working so admirably, and, with rare exceptions, 
accomplishing desired results. But this valuable machinery will 
not always last. His grasp of the level will be gradually loos- 
ened. He will trust to others what he once thought could 
only be done by himself, and he thought rightly. At this junc- 
ture men of princely fortunes, by one single misstep, have lost 
all. Some of our wealthiest men, conscious of this approaching 
epoch, have "hedged," by investing largely in life insurance. 

There are other younger business men, whose fortunes are not 
3 r et made, and who, utilizing the experiences of others, have in- 
vested quite extensively in Endowments, Tontines, Semi-Tontines 
and other forms of Life Insurance, paying for them during their 
present productive periods of life. These insurances, in the event 
of premature death, will constitute an estate, together with other 
accumulations, as large, probably, as if they had lived their full 
measure of days. These young men have learned that men die, 
and that they sometimes die in the full strength of manhood, 
when their prospects are the brighest, before their well matured 



OF LIFE INSURANCE. 19 

plans have had time to work out expected results, and just when 
they have reached the threshold of success. They have seen such 
untimely deaths bring financial loss, and sometimes utter ruin, to 
bereaved families. It was like the freighted ship sinking in full 
view of the safe harbor ; or, the costly building going up in smoke 
and cinders ! These representatives of American enterprise are 
hopeful, for they have reasons to be, but there still remains a 
period of uncertainty between hope and accomplished results, 
and they have thus bridged.it over by the only method known 
and approved by the best intelligence of the nineteenth century. 

THE LAW OF MORTALITY. 

"Mortality," says Dr. Southwood Smith, "is subject to 
a law, the operation of which is as regular as that of gravitation/' 

Mr. Babbage says: "Nothing is more proverbially uncer- 
tain than the duration of human life when the maxim is applied 
to an individual ; but there are few things less subject to fluctua- 
tion than the average duration of life in a multitude of indi- 
viduals." 

Mr. Walford says that the average duration of life in Great 
Britain at the present time— 1867 — is 41 years ; in France 40; in 
Sweden, 39; in other countries progressively downwards until 
the average throughout the world is found to be only 33 years. 
In Rome, thirteen hundred years ago, the average was much the 
same as in England now. We know, however, that the duration 
of life at all ages has increased considerably during the past cen- 
tury. Amongst the nobility and gentry of England, the expecta 
tion of life at the age of 84, is found to be four years ; and, 
amongst the poor fishermen of Ostend it is precisely the same. 
Mr. Walford closes his remarks with the following remarkable 
statement: 

" We have the very best of authority for stating, while the 
mortality of all the other epochs of life is affected by country, by 
station, and by a multitude of influences arising out of these and 
similar circumstances, the concurrent evidence of all observation 
shows that at this, and the like advanced ages, the mean term of 
existence is nearly the same in all countries, at all periods, and 
amongst all classes of society." 

The Hon. Blizur "Wright, in his fourth annual report to 
the Legislature of Massachusetts, says: "Observations on the 
population of particular localities, and of entire nations, on annuu 
tants who have the strongest pecuniary motive to live, and who 
have often been selected for their strength of vitality, and on 
insured lives that have an almost equally strong pecuniary motive 
to die promptly, have resulted in scales of decreement differing 
so little from each other and from a regular curve, that one must 



20 THE THREE SYSTEMS 

be profoundly skeptical not to believe in the existence of a per- 
fectly graduated scale, curve or law, which nature works after as 
her pattern or type." 

MORTALITY TABLES. 

The Mortality Table is the foundation upon which the science 
of Life Insurance is constructed. Without it the business would 
be entirely speculative. "Tell me a man's companions and I will 
tell you his character," says a distinguished writer ; and the same 
author also says : "Tell us the Mortality Table upon which an 
Assurance office is based, and it is equally possible — always 
assuming the existence of sound management — to predict its 
financial position and relative advantages." 

A mortality table is made by observing the operations of the 
Law of Mortality as shown by the number of deaths at all the 
different ages in a province, kingdom, countiy or among insured 
lives, and then collating, analyzing and adjusting the results so 
obtained. The process of adjustment or graduation is upon the 
same principle that astronomers "reduce ," as it has been termed, 
their observations to some common event or epoch. It is 
getting rid of a periodical cause of fluctuation and presenting a 
result not as it was observed, but as it would have been observed 
had that cause of fluctuation had no existence. Mr. Walford 
illustrates it substantially as follows : 

Between the ages of fifteen and twenty -five, and even up to 
later ages, the mortality is kept down in large towns by the in- 
flux of healthy people from the country. Thus, in the city of 
London, the annual mortality amongst young women between 
the ages named, is only six per one thousand; while in the sur- 
rounding counties it is seven to eight per one thousand, and 
amongst young men in London, at the like ages, it is eight per 
one thousand. The solution is found in the fact that healthy 
young women go from the country into London and other large 
towns, obtain situations, and, if taken sick, go back into the 
countiy to die. The effect is to make the larger towns look more 
healthy than the country, at these ages. Mortality tables con- 
structed upon extensive data from town and country life would 
not be materially affected by such fluctuations ; but those based 
upon town observations, only, are certain to be more or less so, 
unless subjected to the processes of adjustment and graduation 
named. The mortality tables almost exclusively used in the 
United States are : 

1. The Actuaries', or Combined Experience Table. 
—This is based upon the recorded experience of seventeen Eng- 
lish Life Companies. It was deduced from 83,905 insured lives 
under the superintendence of a committee of distinguished actu- 



OF LIFE INSURANCE. 21 

aries appointed for that purpose, on the 19th day of March,, 1838. 
The table was first published by Actuary Jenkins Jones in 1843. 
2. The American Experience Table.— This table was 
constructed by Sheppard Homans, Actuary of The Mutual 
Life Insurance Company, of New York, from 1856 to 1871; 
author of "The Contribution System of Dividends/' and, 
at the present time, President and Actuary of ' ' The Provident 
Savings Life Assurance Society of New York." The 
table is mainly based on results obtained among insured lives in 
America, bat all the standard European tables were used in the 
processes of adjustment and graduation. 



22 THE THREE SYSTEMS 



CHAPTER II, 



Actuary.— Assets,— Brokerage.— Commissions.— Stock Com- 
panies. — Mutual Companies.— Mixed Companies. — Con- 
tribution System of Dividends.— Cash Dividends.— Re- 
versionary Dividends, or Additions. — Expectation op 
Life.— Forfeiture. --Lapse. —Loading.— Loss.— Mortality. 

Accumulation.— When used in the "Level Premium Sys- 
tem," it means either ''reserve accumulation" or "dividend 
accumulation" For a full explanation of the former, see pages 
61 and 62. "Dividend accumulation" occurs when a policy 
holder, instead of using his cash dividends in part payment of 
premiums, leaves them with the company until some designated 
future time, when he can draw them out in one sum, together 
with the interest earned. When used in the "Natural Premium 
System/' or in the "Assessment System", of Life Insurance, it 
means a mortality fund, gradually increasing from year to year, 
in excess of what the mortality table indicates as necessary, to be 
used, however, in payment of death claims, if needed; or, to be 
drawn out by the insured at some designated future time ; or, to 
be applied in part payment of future premiums or assessments ; 
or, applied in some other way designated in the policy or certifi- 
cate of membership. The accumulation of such a fund is a wise 
precautionary measure by which the membership are held to- 
gether, or by which death claims may be paid, that might be 
suddenly forced upon the company on account of excessive mor- 
tality from epidemics, etc., etc. 

Actuary.— One who is proficient in that branch of Life In- 
surance, which is strictly of a scientific and mathematical nature. 
The Actuary of a company makes the rates, at all the ages, for 
$1,000 of insurance on the different kinds of policies issued by 
that company. These rates, when published in book form, are 
called the "rate book" and, by consulting it one can ascertain 
how much it will cost, the first year, for any amount of insurance 
desired within the company's limit. The Actuary also calcu- 
lates how much cash dividend his company may safely pay to 
each policy-holder at the next approaching policy anniversary. 
When a policy-holder desires to surrender his original policy for 
a smaller amount of paid up insurance ; or, for cash ; or, in ex- 



OF LIFE INSURANCE, 23 

change for some other kind of a policy, the Actuary is con- 
sulted, and it is he who determines, subject to the approval of 
the board of management, what shall be done. It is the Actu- 
ary who, from time to time— once every year, at least— informs 
the company how much "reserve accumulations " it must have in 
hand to meet the requirements of law, etc. , etc. A State Actu- 
ary, or the Actuary of The Insurance Department of a 
state, receives his appointment from the department, and his 
services are employed in this way : When a Life Insurance 
company desires to do business in a state in which it has not been 
operating, it makes application to the Insurance Department of 
that state for admission. It is then required to send to the de- 
partment a schedule of all its policies in force, giving, in detail, 
the age of every policy-holder when insured ; also, the date, 
amount and kind of policy. This schedule is given to the Actu- 
ary of the department, who is required " to value ," as it is called, 
every policy described therein, according to the Table of Mor- 
tality and rate of interest adopted by the state as its standard of 
valuation. The valuing of a policy consists in ascertaining how 
much its " reserve accumulation" must be, at a certain date, — gen- 
erally, December 31 — , to comply with the requisitions of law. 
When every policy is thus valued, the different amounts thus 
obtained are added together, and the total amount constitutes 
what is called the ''policy liability " of the company ; to this are 
added the other liabilities, — admitted, but unpaid death claims, 
matured endowments, etc., etc.—, and the result shows the " total 
liability '" of the company Then this total liability is critically 
compared with the company's "gross assets." If the results 
prove satisfactory to the department, it issues a license to the 
company to do business in the state. If at any time the Depart- 
ment of Insurance become suspicious that any Life Insurance 
company doing business in the state is not sound, it can demand 
another examination as thorough as if the company were apply- 
ing for admission into the state for the first time. The policies 
of all home qompanies have to be valued every year by the State 
Actuary. In various other ways the services of a competent 
actuary are made very useful to the department and beneficial to 
every policy-holder in the state. 

Assets. — All the available funds and property of any kind 
belonging to a Life Insurance company. These are closely scru- 
tinized by the Insurance Department of every state. Companies 
admitted to business are required to report to the department, on 
the 31st of December of every year, not only the amount of its 
assets, but also the minutest details of the same, and these reports 
must be sworn to. 

Brokerage.— A percentage paid to an agent or solicitor, by a 
corhpany, on the first year's premiums, only, of policies obtained 
by him, in lieu of future commissions on renewal premiums. 



24 THE THREE SYSTEMS 

Commissions.— A percentage paid to an agent or solicitor 
on all premiums of policies obtained by him, for a specified num- 
ber of years. 

Company, Insurance.— There are three kinds of Life In- 
surance companies: Stock Companies, Mutual Companies, and 
Mixed Companies. 

A Stock Company has for its basis a capital stock. The 
stockholders elect a board of directors, and they the officers who 
conduct the entire business of the company under the direction 
and supervision of the board. The rates charged for insurance 
are, nominally, Lower than in the other companies. Policy- 
holders would pay less in a stock company than in most mutual 
or mixed companies, for the first few years, but, as all the margins 
and profits made in a stock company go to the stockholders, there 
are no dividends to reduce their premiums, so that after having 
been insured for 'fifty years, they still have to pay the same pre- 
miums as at first. But some so-called stock companies are really 
mutual. They organize on the basis of a nominal capital, so as 
to secure to the stockholders the control of the business, but in 
every other respect they are mutual companies, giving all the 
profits of the business, over and above what is necessaiy to run it, 
to the policjr-holders. 

A Mutual Company is one that is nominally controlled by 
the policy-holders, themselves. Every policy-holder has the right 
to vote, in person or by " proxy ," in the election of a board of di- 
rectors. The largest and most successful Life Insurance com- 
panies on the globe are mutual companies, and their policy- 
holders have always had the right to vote at their annual elec- 
tions ; but their success and their present proud positions in the 
insurance world are owing to the fact that, from first to last their 
business has been largely controlled by a few men who have 
proved themselves equal to every emergency that has arisen, and 
faithful to the sacred trusts confided to them by the proxies of a 
numerous, intelligent and appreciative membership. The same 
can be said of other but younger companies that are rapidly 
coming to the front, and, juniors though they are and must 
always be, they even note claim superiority in some things over 
their seniors. In a ^strictly mutual company, the dividends are 
paid to its policy-holders, from whatever sources they may arise. 
The system is a popular one. It seems to possess certain ele- 
ments of success not found in either the stock or the mixed 
companies. 

A Mixed Company is one that does business, nominally, on 
both the stock and the mutual plans. It is neither a purely 
mutual company, nor a strictly stock company. It is based on a 
stock capital, and therefore the policy holders have nothing 
whatever to do with its management. Poliev-holders who insure 



OF LIFE INSURANCE. 25 

on the stock plan receive no dividends ; those who insure on the 
mutual plan receive dividends. 

Contribution System of Dividends.— This is a system 
by which the surplus of a company is distributed among its 
policy-holders, from year to year, according to the amount that 
each one of them has contributed to produce it. It was a won- 
derful discovery, and its authorship is conceded to two emi- 
nent American Actuaries, Sheppard Homans and D. Parks 
Fackler ; the former, now President and Actuary of The 
Provident Savings Life Assurance Society, of New York; the 
latter, Consulting Actuary for several of the leading Life Insur- 
ance companies of that and other states. The merits of this sys- 
tem of distributing surplus is shown by the fact that all the Life 
companies in the United States— we are not aware of a single 
exception— have adopted it. Before its discovery a policy- 
holder that had been insured in a company, twenty years, received 
no larger dividend, other things being equal, than did one who 
had been insured but five years. By this system, the older the 
policy, the larger the dividend. A policy holder whose reserve 
accumulation in the hands of the company is $1,000, receives, from 
this source, ten times the amount that another would receive 
whose reserve accumulations were only $100. 

Dividend. — For a full explanation of Cash Dividends, 
See pages 65 — 68. "Reversionary dividends," or "re- 

versionary additions," as they are sometimes called, are paid up 
insurances purchased from year to year by cash dividends. To 
illustrate : Suppose one is insured on the ordinary Life plan, 
in a "Level Premium Company," and that his cash dividend, at 
the end of the first year, when he is thirty-five years old, is 
$38.54. This dividend could be used in part payment of the pre- 
mium, just due; but, instead, he applies it to the purchase of paid 
up insurance. It would purchase, in some companies, exactly 
$100 of such insurance, payable when the original policy is pay- 
able— at death. At the beginning of the next year he starts off 
with the original policy, on which he is to pay premiums every 
year as long as .he shall live, and he also has a little policy of $100 
upon which he will never have to pay any premiums, and from 
which he will receive little dividends, probably, every year. 
Suppose he does the same next year, and that his cash dividend 
is then $39.31. He is now 36 years old, and although the 
dividend is a little larger than it was last year, he is one year 
older, and it will purchase only $100 of paid up insurance. The 
rate is higher at 36 than at 35. Suppose, at the end of a policy 
year, when his nearest age is 55, his cash dividend is $58.74. 
Because of his increased age, this much larger dividend will 
purchase only $100 of paid up insurance. At age 70, it would 
require a cash dividend of $76.60 to purchase $100 of paid up 
insurance. These several amounts of paid up insurance, pur- 



26 THE THREE SYSTEMS 

chased by the cash dividends, are called "reversionary addi- 
tions," or iC reversionary dividends." 

Expectation of Life.— A term applied to the mean or 
average duration of the future life of a person, at any age, accord- 
ing to a given table of mortality. 

Forfeiture.— The violation of some of the conditions of a 
policy, which gives a company the legal right to cancel its policy 
contract with the insured. 

Lapse.— See Chapter VI. 

Loading" —A percentage added to the " net premium" for 
defraying the expenses of a company and to provide for a possi- 
ble excess of mortality. 

Loss. — A legal claim against a company arising from the 
death of one of its policy-holders. Matured Endowments, ma- 
tured Tontine policies, and other policies partaking of the nature 
of Tontines, strictly speaking, are not losses. 

Mortality. — Having a given number of persons of the same 
age living at the beginning of a year, the mortality is the num- 
ber dying during that year. The rate of mortality is the ratio of 
the number dying, during a year, to the number that were living at 
the beginning of the same year. 



OF LIFE INSURANCE. 27 



CHAPTER III, 



Policy. — Single Payment Life, with Example. — Five-Pay- 
ment Life, with Example.— Ten-Payment Life, with 
Examples (1) and (2). — Fifteen-Payment Life.— Twenty 
Payment Life.— Ordinary Life, with Example. — Term 
Life.— Renewable Term Life. — Quarterly Renewable 
Term Life. 

Policy. — A contract between a Life Insurance company and 
one of its policy holders, containing the terms and conditions on 
which the former indemnifies the beneficiary, or beneficiaries, 
named therein, against financial loss in the event of the death of 
the person insured; or, b} r which the company agrees to pay a cer- 
tain sum of money when the insured shall attain a certain age. 
It is not possible here to even name the different kinds of 
policies issued b}^ the companies doing business in this country. 
The following are the most common and popular forms : 

Single- Payment Life.— This is a policy that is payable at 
the death of the insured, only. All the premiums are paid in one, 
single sum. If issued on the Stock plan, no dividends ; if on the 
Mutual plan, dividends are paid by the company to the insured 
every year during life. For $1,000 of insurance, at age 40, the 
Stock rate is, say, $367.70; Mutual rate, say, $430.19. 

Example.— Policy No. 23,342 ; amount, $10,000 ; date of issue, 
April 8, 1863 ; premium, $4,077 ; age, 38. The annual cash divi- 
dends were used to purchase additional insurance. Wheu tne 
policy had been in force sixteen years, the " dividend additions" 
amounted to $6,020. Had he died, at that time, his estate would 
have received. $16,020.95, less $547.57!! 

Five- Annual Payment Life.— This policy is payable at the 
death of the insured only. The premiums are required to be all 
paid during the first five years. If issued on the Stock plan, no 
dividends ; if on the Mutual plan, dividends are paid to the in- 
sured every year during life. For $1,000 of insurance, at the age 
of 40, the Stock rate is, say $75.87 annually ; Mutual rate, say 
$101.16 per annum, for five years only. 

Example.— Policy No. 32,247 ; amount, $10,000 ; date of issue, 
June' 4, 1864 ; annual premium, for five years only, $953.80 ; age, 
39. His cash dividends, during the first fourteen years amounted to 
$2,257 34. After the first five years they averaged $100 per 



28 THE THREE SYSTEMS 

annum. The cash dividends, during the first eight years, were 
used to purchase additional insurance. From the eighth to the 
fifteenth year, inclusive, he gradually converted the additions 
from former dividends into cash and used it, together with the 
accruing cash dividends, in payment of premiums in the same 
company on another policy, and still had left at the end of 1878, 
additions amounting to $334. He had thus paid $2,296.23 in 
premiums on the other policy ! This policy can never be dupli- 
cated even by the company that issued it. 

Ten- Annual Payment Life.— This policy is payable at 
the d eath of the insured only . All the premiums are required 1 o 
be paid during the first ten years. If issued on the Stock Plan, 
no dividends; if on the Mutual Plan, dividends are paid to the 
insured, every year, during life. For $1,000 of insurance, at age 
40, the Stock rate is, say, $47.43, per annum; the Mutual rate is, 
say, $59.17, per annum. 

Example 1.— Policy No. 17,114; amount, $4,000; 
date of issue, August 6, 1856; annual premium for 
ten years, only, $189.92; age, 31. 

The record of this policy from 1856 to 1878, inclusive — 
twenty-three years — is as follows: Total premiums paid dur- 
ing the first ten years, $1,899.20. The cash dividends were 
all used to purchase additional paid-up insurance. This addi- 
tional insurance, thus purchased, amounted to $2,990.20 at the 
end of the twenty -second year! Had the policy then become a 
claim, by the death of the insured, his estate would have re- 
ceived from the investment $6,990.20. He had paid the company 
less than $1,900. These results can probably never be duplicated, 
as the period from 1856 to 1878 was an exceptional one for large 
dividends in all the companies, owing to the high rates of interest 
received on their reserves. 

Example 2. — Policy No. 46,036; amount, $1,000; date of issue, 
May 22d, 1869 ; annual premium, for ten years, only, $52.72 ; age, 
36. The history of this policy, from 1869 to 1885, inclusive, — 
seventeen years— , is as follows: 

Annual Dividends Net Annual Payments. 

$00.00 $52.72 

00.00 52.72 

4.24 48.48 

6.49 46.23 

8.91 43.81 

12.05 40.67 

14.63 38.09 

17.32 35.40 

19.79 32.93 

22.34 30.38 



Year. 


Annual Premiums, 


1869 


$52.72 


1870 


52.72 


1871 


52.72 


1872 


52.72 


1873 


52.72 


1874 


52.72 


1875 


52.72 


1876 


52.72 


1877 


52.72 


1878 


52.72 




$527.20 



$105.77 $421.48 



OF LIFE INSURANCE. 29 



lual Dividends. 




$20.35 




21.95 




14.08 


P 

eg, 

is 


10.53 
8.08 
8.16 
8.36 


$91.51 


£ 



Year. 

1879 
1880 
1881 
1882 
1883 
1884 
1885 



Remark 1. — The company that issued this policy commences 
paying dividends at the end of the second policy year, when the 
third annual premium is paid ; so that, in the above policy, only 
eight dividends were available in payment of the ten premiums. 
These eight dividends amount to $105.77, and had they been 
equally distributed and used in paying the ten premiums instead 
of eight, the net gross amount paid would have been $421.43, 
as shown above. Thus it is seen that the eight dividends, used 
as they were, were equivalent to a twenty per cent, reduction of 
premium, from first to last. 

Remark 2. — Since 1878 this policy has been a source of cash 
income. Dividends to the amount of $91.51 have already been 
received by the insured. The dividend of 1885 lacks only seven 
cents of being two per cent, of the entire cost of the policy, and 
the tendency is an increase hereafter. 

Remark 3.— The cost of such a policy in a Stock Company, 
at the non-participating rate of premium, would have been 
$474.30, or thereabouts, and no dividends! 

Fifteen- Annual Payment Life. —This policy is made pay- 
able only on the death of the insured. All the premiums must be 
paid during the first fifteen years. If issued on the Stock plan, no 
dividends ; if on the Mutual plan, cash dividends during life. 
For $1,000 of insurance, at age 40, the Stock rate is, say, $35.05 
per annum ; the Mutual rate is, say, $45.29. 

Twenty- Annual Payment Life.— This policy is made pay- 
able only on the death of the insured. All the premiums must be 
paid during the first twenty years. If issued on the Stock plan, no 
dividends ; if on the Mutual plan, cash dividends during life. 
For $1,000 of insurance, at age 40, the Stock rate is, say, $30.10 ; 
the Mutual rate is, say, $38.65. 

Ordinary Life.— This policy is made payable only on the 
death of the insured. Premiums must be paid during life. If 
issued on the Stock plan, no dividends ; if on the Mutual plan, 
cash dividends are paid every year — after the first or second — so 
long as the policy remains in force. For $1,000 of insurance, at 
the age of 40, the Stock rate is. say, $24.35 ; the Mutual rate is, 
say, $30.84. The rates are lower at younger, and higher at older, 
ages, as is the case in all other forms of policy contract. 



30 THE THREE SYSTEMS 

Example.— Policy No. 55,904; amount, $2,000; date, 1868; an- 
nual premium, $92.00; age, 50. He paid fifteen premiums amount- 
ing to $1,380, which, less dividends of $401.32, and premium loan 
of $288.68 (canceled), made a net payment or cost of $690.00, 
exclusive of interest. He did not pay the premium due in 
December, 1883 ; but instead of taking a paid-up policy for 
$563.00, he allowed his insurance to be extended for 4 years and 
117 days, making in all 19 years and 117 days' insurance, at an 
average yearly cost of $17.85 per thousand. The party insured 
died in August, 1885, more than one year after the lapse of policy, 
which, however, was promptly paid in full by the company. 

Term -Life. — This policy is made payable only on the death 
of the insured within the term designated in the contract. The 
term may be one, three or six months ; one year, ten or twenty 
years. The policy contract may provide for renewal, at the expi- 
ration of the original term, on re-examination of the insured, and 
at advanced rate of premium, or not. This depends upon the 
practices of the company issuing it. A Term Life Policy is 
generally understood to be insurance for 10 to 20 years, with 
uniform annual premiums. No dividends; no paid-up insurance; 
no cash surrender value, and no insurance one minute after the 
designated term has ended. 

Renewable Term-Life. — One single company issues a Re- 
newable Term Life polic}% as follows: Length of term, ten years, 
Uniform annual, semi-annual or quarterly premiums are required 
to be paid during the term. The policy contract is renewable 
after each term of ten years, at advanced rate, without medical 
examination, and the accumulated dividends of the last pre- 
ceding ten years, if any, are applied to a uniform reduction of 
the next ten years' premiums. Definite provisions are made for 
paid up or cask surrender value, if desired, after the first three 
years. The annual rates for $1,000 of insurance are as follows : 
At age 20, $11.09 ; at 25, $12.64 ; at 30, $14.67 ; at 35, $17.36 ; at 
40, $21.02; at 45, $26.14; at 50, $33.17; at 55, $42.66, and at 60, 
$55.64. The rates at intermediate ages are proportional. 

Several companies issue a Yearly Renewable Policy. For 
$1,000 of insurance, at age 40, the premium the first year is 
$21.19; the second year, $15.71; the third year, $15.99 ; the 
fourth year, $16.29, and so on, gradually increasing from year to 
year, as the insured becomes older. No dividends, no surrender 
value in cash or paid up insurance, 

Quarterly Renewable Term -Life.— Under this form of 
contract the policy is made payable only on the death of the 
insured within the term designated, and that term is three 
months. 



OF LIFE IS'SUKAXCE. 31 



CHAPTER IV. 



Endowment Insurance —Questions Asked and Answered. — 
Assumed Examples. — Actual Examples. 

Endowment Insurance Policies. — These are issued in two 
general forms— (1), Ordinary Endowments ; (2), Limited 
Payment Endowments. In an Ordinary Endowment, the 
policy is made payable to the insured in ten, fifteen, twenty, 
twenty -five, thirty or thirty-five years after the date, thereof, pro- 
vided he be then living to receive the money ; or, to his estate, or 
some beneficiary named, at the death of the insured, should it 
sooner occur. Premiums must be paid every year, less the divi- 
dends, if any, during the entire endowment period selected. 

For a Limited Payment Endowment the conditions of the con- 
tract are precisely the same, except the premiums must all be paid 
in a less time than that named as the Endowment period. To 
illustrate : A twenty -year Endowment may be paid for in ten or 
fifteen, or even five years ; or, a thirty-five year Endowment may 
be paid for in thirty, twenty-five, twenty, fifteen or five years; or, 
any of these may be paid for in one single premium. 

As these endowments, in our best companies, have proved U 
be compound interest investments combined with very cheap 
insurance— the insurance in some cases costing nothing at all — we 
have endeavored to make prominent these excellent character- 
istics in the following questions and answers : 

"What is Endowment Insurance? 

It is Life Insurance for a limited time, usually ten, fifteen, 
twenty, twenty five, thirty or thirty-five years. 

It is something like Term Insurance, is it not? 

Yes, but in some respects radically different. In Term Insur- 
ance the policy is not paid unless death occurs during the term. 

Isn't the policy paid, in Endowment Insurance, if death 
occurs during the term ? 

Yes, or it is paid to the party insured, if living, at the end 
of the term, which is not the case in Term Insurance. 

Then, in Endowment Insurance, one does not have "to 
die to win," as the saying is? 

That's it exactly. In Ordinary Life Insurance, provided, 



32 THE THKEE SYSTEMS 

always, that the conditions of the contract are complied with, 
the policy becomes a claim whenever death occurs. In Term 
Insurance, death must occur during the prescribed term or there 
is no claim, while in Endowment Insurance, the policy is 
paid at death, during the term; or, to the insured, if living, at the 
end of the term. 

What is the cost of an Endowment, in comparison with other 
forms of Life Insurance? 

It is considerably higher. 

Why is it higher? 

Because Endowment Insurance is Term Insurance 
combined with a compound interest investment. To illustrate : 
We assume that you are thirty-five years old, that you are insured 
under a twenty year Endowment Contract, for $10,000— annual 
payment, say, $485.80. By one of the conditions of the contract, 
you agree to pay $485.80, every year, for twenty years, 
if you live ; but, if you die at any time during the twenty years, 
no further payments are required after date of death. The 
Company agrees to pay you $10,000 if living to re- 
ceive it at the end of the twenty years ; or, to pay your legal 
representatives $10,000 soon after your death, if it occur 
within the twenty years. 

Referring to Table No. 12, we see that $256.50 per year, at six 
per cent, compound interest, will amount to exactly $10,000 
in twenty years. You understand, therefore, that if you live 
until the maturity of the Endowment, and receive the $10,000 
from the company, you will have made an investment of $256.50 
per year and actually realized six per cent, compound interest 
on the money thus invested, for the time it was with the com 
pany. When the company contracted to pay the $10,000 at the 
time and under the conditions specified in the policy, it guaran- 
teed, absolutely, just such an investment to the extent of $256.50 
per year. Nor was the guaranty alone conditioned upon your 
living and paying the premiums to the end of the twenty years ; 
but, in the event of your death at any date during the twenty 
years, all the conditions of the contract having been fulfilled by 
you, the guaranty was that as much money should be paid to 
your representatives as you would have realized had you lived to 
loan out $256.50 every year for twenty years, at six per cent, com- 
pound interest. 

This $256.50 of the Endowment Premium under consideration, 
is what we call the investment element. This amount, an- 
nually — or a larger sum, at a less rate of interest — must accumu- 
late with the company at six per cent, compound interest, in 
order that the company may meet its obligations on the contract 
when it shall have matured. 

But you are paying the Company more than $256. 50 per year, 
and this excess is the cost of insurance. We assume that you are 



OF LIFE INSURANCE, 88 

insured in a dividend paying company, and that you are using 
the dividends, from year to year, in reduction of the annual pay- 
ment. Our better class of life companies have been paying on 
this kind of insurance, the last 20 years, a dividend of from 25 
to 40 per cent, per annum, as an average for the whole time 
Suppose, at the end of the twenty years, 3 T our dividends have 
averaged 33 % P er cent, of the annual premium; we then have the 
following results: 

Twenty- Year Endowment at Age 35: 

Gross annual premium for $10,000 $485 80 

Less the assumed average annual dividend. .... 161 93 

Net annual payment $323 87 

The investment element returned with six 
per cent, compound interest, end of twenty 
years, in the $10,000 paid by Company 256 50 

Annual cost $67 37 

At ages thirty, twenty-five, or twenty, with the same as- 
sumptions as above, the results would be as follows: 

Twenty -Year Endowment at Age 30: 

Gross annual premium for $10,000 $471 10 

Less the assumed average annual dividend 157 03 

Net annual payment $314 07 

The investment element returned, &c 256 50 

Annual cost $57 57 

Twenty- Year Endowment at Age 25: 

Gross annual premium for $10,000 $460 70 

Less the assumed average annual dividend 153 57 

Net annual payment $307 13 

The investment element returned, &c 256 50 

Annual, cost $50 63 

Twenty- Year Endowment at Age 20: 

Gross annual premium for $10,000 $452 90 

Less the assumed average annual dividend 150 97 

Net annual payment $301 93 

The investment element returned, &c 256 50 

Annual cost ; . . . $45 43 

Equally satisfactory results can be shown in shorter or longer 
endowments. Table No. 12 gives the investment elements at 
certain rates of interest. In a ten-year endowment, for example, 
the annual premium for $10,000 at age 35, is, say, $1,025.10. De- 



34 THE THREES SYSTEMS 

duct from this the average dividend of the company, and from 
this result the investment element, $715.70, and the b-.lan.ee shows 
the cost of insurance ; and, similarly, with endowments running 
fifteen, twenty-five, thirty or thirty -five years. If the rate of in- 
terest assumed in our illustrations — 6 per cent. — seems too high, 
use the investment elements at a lower rate, as shown in the table. 
You have not failed to notice that, while the Investment 
Element in the foregoing examples is the same, the cost of in- 
surance varies ; it is $45.43 per year, for the }^oungest age, and 
$67.37 per year, for the oldest. The difference in age does not af- 
fect the Investment Element, provided the amount and kind 
of Endowment are the same. But the cost of insurance is greater 
at the older ages. By referring to Table No. 18, you will see 
why. At age 25, less than seventeen out of one hundred die in 
twenty years; while at age 35, the death rate for the same time is 
twenty one. 

A little further on will be found some examples of Matured 
Endowments. These should be carefully examined. Before you 
do this, however, we desire to make one or two points very 
clear. If successful in this the subject of endowments will be 
freed from many vexatious complications. You will now turn to 
Table No. 12. Until you understand this table, you cannot 
comprehend our explanation of endowments. With the table 
before you, look for 16 in the year column, to the right hand of 
which, in the column headed " six per cent., you will find $36.75. 
This is the annual investment, which, if compounded annually at 
six per cent, interest, will amount to exactly $1,000 in sixteen years. 
In the same six per cent, column, at the right hand of 20, may be 
found $25.65. This is the annual investment, which, if com- 
pounded annually at six per cent, interest, will amount to 
$1,000 in twenty years. If you would multiply the result, you 
must multiply the annual investment. Ten times either of the 
above annual investments will produce ten times $1,000, or 
$10,000. In a similar manner, by this table, you can tell at a 
glance the required annual investment, which, if compounded 
annually at a certain rate of interest, will amount to $1,000, or 
any multiple of $1,000, in a given number of years not exceed- 
ing 50. 

At age 40, an Ordinary 20- Year Endowment Policy, for 
1,000, requires the payment of twenty annual premiums of 
$508.70, each, the rate varying a little in different companies. 
For convenience of illustration we divide this premium into two 
parts, as follows: 

1. The Investment Element. $256 50 

2. The Insurance Element 252 20 

Gross premium 508 70 

In a policy like the above, every company agrees to do one of 



OF LIFE INSURANCE. 35 

two things, provided, always, that the insured fulfill his part of 
the policy contract, viz. (1), it agrees to pay to the insured 
$10,000 at the end of twenty years, p ovided he shall then be 
living to receive it ; or, (2), it agrees to pay to somebody else 
$10,000, provided the insured die at any time during the twenty 
years. Let it be assumed that such a policy has been issued ; 
that the insured has lived the twenty years, and that he has re- 
ceived the $10,000 as stipulated in the contract. By again con- 
sulting Table No. 12, it will be seen that when the -company 
paid the $10,000 to the insured, it simply returned $256.50 of every 
one of the twenty annual premiums paid, together with six per 
cent, compound interest on the same, for the entire time the 
money was in its hands !! It is a six per cent, compound 
interest investment, so far as $256.50 of the gross premium 
is concerned. And this was guaranteed by the company from 
the start, because it required precisely sucn an investment to 
produce the $10,000 which the company agreed to pay. Not only 
this, but had the insured died at any time after the payment of 
the first annual premium, and within the endowment period, the 
company agreed that it would pay to somebody as muoh as would 
be produced by such an investment. Living until the end of 
the twenty years, or dying during the twenty years, the insured 
was guaranteed, in the policy contract, the six per cent, compound 
interest investment described! We have now disposed of the in- 
vestment element of the premium ; but what has been done 
with the insurance element, $252.20 ? If this policy were 
issued by one of our best mutual companies, the average 
annual cash dividend, during the twenty years, probably equaled 
one-third of the gross premium. The gross premium is $508.70, 
and one-third of it is $169.57, which has been used in reducing 
the insurance element. Taking $169.57 from $252.20, leaves 
a balance of $82.63, the average annual cost of the insurance. 
A splendid investment ! Very cheap insurance. This 
is an assumed case, but you will see that the assumed are not as 
good as the actual, results in the following examples of ma- 
tured endowments. 

Example 1.— Policy No. 6,014; amount, $8,000 ; 
date of policy, July, 1867 ; kind of policy, 16-year 
endowment requiring sixteen annual payments of 
$480.96, each ; age of the party insured, 39 years. 

He paid sixteen premiums amounting to $7,695 36 

Less the dividends 2,043 07 

Total net payments in sixteen years. . * 5,652 29 

Average net annual payment 353 27 

The annual investment which, if compounded 
annually, at six per cent, interest, will 

amount to $8,000 in sixteen years 294 00 

Net annual cost of the insurance , . , 59 27 



36 THE THREE SYSTEMS. 

This endowment matured and was paid July 1, 1883. The 
investment was $294.00 per year for sixteen years. He realized 
six per cent, compound interest on it, the principal and interest 
amounting to $8,000. 

Example 2.— Policy No. 52,988; amount, $5,000; 
date of Policy, March 5, 1870; kind of Policy, Ten- 
Year Endowment requiring 1 ten annual payments of 
$529.75, each; age of the party insured, 39 years. 

He paid ten premiums, amounting to $5,297 50 

Less the dividends 1,593 35 

Total net payments in ten years 3,704 15 

Average net annual payment 370 42 

The annual investment, which, if compounded 
annually, at six per cent, interest, will 

amount to $5,000 in ten years 357 85 

Net annual cost of the insurance 12 57 

This endowment matured and was paid March 5, 1880. The 
investment was $357.85 per annum for ten years. He realized 
six per cent, compound interest on it, the principal and interest 
amounting to $5,000. 

Example 3.— Policy No. 37,589; amount, $4,000; 
date of policy, March 26, 1866; kind of policy, 15- 
year endowment requiring* fifteen annual payments 
of $302.12 each; age of the party insured, 40 years. 

He paid fifteen premiums, amounting to $4,531 80 

Less the dividends 1,656 55 

Total net payments in fifteen years 2,875 25 

Average net annual payment 191 68 

The annual investment, which, if compounded 
annually, at six per cent, interest, will 

amount to $4,000 in fifteen years 162 12 

Net annual cost of the insurance 29 56 

This endowment matured and was paid March 26, 1881. The 
investment was $162.12 per annum, for fifteen years. He 
realized six per cent, compound interest on it, the principal and 
interest amounting to $4,000. 

Example 4.— Policy No. 5,848; amount, $6,000; 
date of policy, December 26, 1865; kind of policy, 
18-year Endowment requiring' eighteen annual pay- 
ments of $352.82, each; age of the party insured, 37 
years. 



OF LIFE INSURANCE. 37 

He paid eighteen premiums, amounting to $6,341 76 

Less the dividends 2,527 18 

Total net payments in eighteen years 3,814 58 

Average net annual payment 211 92 

The annual investment, which, if compounded 
annually, at six per cent, interest, will 

amount to $6,000 in eighteen years 183 18 

Net annual cost of the insurance 28 74 

This endowment matured and was paid December 26, 1883. 
The investment was $183.18, per annum, for eighteen years. 
He realized six per cent, compound interest on it, the principal 
and interest amounting to $6,000. 

Example 5.— Policy No. 2,541; amount, $1,000; 
date of policy, November 13, 1862; kind of policy, 
20-year Endowment requiring twenty annual pay- 
ments of $48.49, each; age of the party insured, 40 
years. 

He paid twenty premiums amounting to $969 80 

Less the dividends 358 93 

Total net payments in twenty years 610 87 

Average net annual payment 30 54 

The annual investment, which, if compounded 
annually, at six per cent, interest, will 

amount to $1,000 in twenty years 25 65 

Net annual cost of the insurance 4 89 

This endowment matured and was paid November 13, 1882. 
The investment was $25.65, per annum, for twenty years. 
He realized six per cent, compound interest on it, the principal 
and interest amounting to $1,000. 

In the foregoing examples, all the cash dividends were used in 
the reduction of annual premiums. In the following examples 
the dividends were used in the purchase, from year to year, of 
additions to the policies, payable with the policies. 

Example 6.— Policy No. 30,777; amount, $1,000; 
date of policy, February 1, 1868; kind ot policy, 13- 
year Endowment, requiring 1 ten annual payments of 
$85 50, each; age of the party insured, 22 years. 

Total amount of policy and additions paid to the 

insured, by the company, February 1, 1881, $1,282 78 

Cash dividend paid him February 1, 1881 34 97 

Cash dividend paid him February 1, 1882 26 15 

$1,343 90 



38 THE THREE SYSTEMS 

His ten premiums improved at 5% per cent, 
compound interest would have amounted 
at date of settlement to $1,349 38 

And he received in addition life insurance for thirteen years. 

Example 7.— Policy No. 45,352; amount, $1,000; 
date of policy, April 28, 1869; kind of policy, 10- 
year Endowment requiring ten annual payments of 
$96.41 each; age of the party insured, 35 years. 

Total amount of policy and additions paid to 

the insured, by the company, April 28, 1879, $1,218 88 
Cash dividend paid him April 28, 1880 42 86 



$1,261 74 
His ten premiums improved at 4,% per cent, 
compound interest, for the time, would 
amount to « $1,264 36 

And he received in addition life insurance for ten years. 

If the National Banks were to advertise that, upon 
depositing with them $256.50 every year, for twenty years, at the 
end of the 20 years the deposits would be returned, with six per 
cent, compound interest, amounting to $10,000 for every de- 
positor, and if a small additional sum were deposited with 
each $256.50, they would pay, in the event of the death of a de- 
positor, before the expiration of the 20 years, the whole amount 
of $10,000, sixty or ninety days after date of death, what a 
stampede there would be to all our National Banks ; 
and yet, varying the figures to correspond with the different ages 
of persons, and classes of policies, this is substantially what all 
the better class of life companies are doing' every day 
in the year and every hour in the day, in offering these endow- 
ments to business and professional men and capitalists. 

Semi-Endowment Policies.— By this form of insurance 
the face value of the policy is payable if the insured die within 
a certain number of years -usually ten, fifteen or twenty — but if 
alive at the end of that time, then only one-half of the amount, 
with accumulations, if any, will be paid to the owner of the 
policy. 



OF LIFE INSURANCE. 39 



CHAPTER V. 



Tontine Insurance. — Semi-Tontine Insurance. — Emery Mc- 
Clintock's Description of Them. — Senate Resolution 
No. 100, of the Ohio Legislature.— Appointment of a 
Committee of Investigation.— Members of the Commit- 
tee. — Their Report on Tontines and Semi-Tontlnes. — 
Extracts from Sworn Testimony. — Remarks, Etc., Etc. 

Tontine and Semi- Tontine Policies. — The following 
explanation of these two forms of policies is from Emery 
McCllntock, Actuary of the North Western Mutual Life 
Insurance Company, of Milwaukee, Wisconsin, and it is so 
clearly stated, and so free from offensive partisanship that we 
gladly insert it for the benefit of our readers, 

Tontine Policies are issued on any usual form, the same as 
ordinary policies, such as ordinary life, limited payment life, or en- 
dowment policies. They are issued at the usual rates of premium, 
and the only difference between such policies and ordinary poli- 
cies lies in certain peculiar stipulations. 

The first stipulation is as follows : 

"No dividend shall be allowed or paid upon this policy until the person whose 
life is insured thereby shall survive the completion of its tontine dividend period, 
and unless this policy shall then be in force." 

The period referred to is either ten, fifteen, or twenty years, 
according to the choice made by the policy holder in his original 
application. The effect of this stipulation is that each premium 
must be paid in full in cash, during the tontine period, without 
being reduced by dividends. 

The second stipulation is : 

"Previous to the completion of its tontine dividend period, this policy shall have 
no surrender value in a paid-up policy or otherwise. 

The effect of the stipulations above quoted is to produce sav- 
ings to the Company, first, in not paying out dividends, and sec- 
ondly, in not issuing paid-up policies in case of lapse. The value 
of such savings, with their accumulations, is credited to the 
tontine policies which complete their respective periods. 

Semi-tontine Policies form a separate variety, being like 
tontine policies as regards withholding dividends, but enjoying 



40 THE THREE SYSTEMS 

the same privileges as ordinary policies in case of lapse, as regards 
paid-up insurance. 

How the Surplus is Ascertained. — An account is kept 
by the Company from year to year of the special savings derived, 
as above explained, from tontine policies ; and a separate account 
is kept for semi-tontine policies. To keep in view the equitable 
rights of each tontine and semi-tontine policy, a provisional ac- 
count or memorandum of its contributions to the undivided sur- 
plus is kept, including its share of special tontine profits, adding 
interest from year to year at the current rate used in the ordinary 
dividend calculations. The memorandum thus kept of each 
policy is subject to future rectification, and is not in the nature of 
a deposit account, nor does it create any liability, technically 
speaking, different from the usual duty of every company to dis- 
tribute in due time its undivided surplus on equitable principles. 
The sum of all these memorandum accounts shows the total ton- 
tine surplus of the Company. The accounts for each calendar 
year cannot be made up until sixt}^ days after December 31st. 
owing to the conditional right possessed by the holders of lapsed 
tontine policies to restore them within that time. By the end of 
March in each year, the tontine accounts of the previous year can 
be completed. Any member, who has been insured three years, 
who wishes to learn the present condition of the memorandum 
account kept in his own case, can do so by addressing the Com- 
pany. A fuller description of the method of keeping the tontine 
accounts will be supplied to any member on request. 

What May Be Done With the Surplus. — The holder of a 
tontine or semi-tontine policy may, at the end of his tontine pe- 
riod, presuming that he wishes to keep his policy in force, employ 
the accumulated surplus which may then be at his disposal in one 
of three ways: 

1st. He can withdraw it in cash. 

2d. He can employ its value in reducing the amount of the 
future annual premium payable. If his policy is an ordinary life 
policy, this is equivalent to purchasing an annuity for life equal 
to the amount by which the annual premium is reduced. The 
annuity is calculated for a larger annual amount than the mere in- 
terest on the money, but on the understanding that the Company 
is in no case to refund any part of it, except as stated, towards 
payment of premiums. Such an annuity will possess at all times 
an equitable value, and it is provided that in any year in which 
the premium so reduced is not paid in cash, the value of the an- 
nuity shall be drawn upon towards meeting it, so as to keep the 
policy in force. (Of course, the effect of this would be to make 
the subsequent premiums each proportionately larger.) 

3d. He can, on furnishing satisfactory proof of good health, 
purchase with the surplus a non-forfeitable participating paid-up 
addition to his policy. 



OF LIFE INSURANCE. 41 

Endowments maturing at the end of the tontine period cannot 
be continued in force, but are simply paid off when due, with 
accumulated surplus. 

Option of Surrender at End of Period.— If, at the end 
of the tontine period, the insured prefers to discontinue his 
policy, he can surrender it, either for cash or for paid-up insu- 
rance, according to his option. (If the paid-up policy exceeds 
the original amount, proof of good health will be required ) If 
he takes the ca^h, the Company pays him not only the accumu- 
lated surplus, but also the entire reserve held on the policy, aris- 
ing out of his past payments. The amount of reserve which will 
be held and paid is inserted in ihe polic} r , but no stipulation is 
possible, of course, concerning the amount of the surplus which 
is to accumulate, nor does the Company undertake to make in 
advance any prediction concerning its probable amount. 

This option of surrender, which gives the insured the benefit 
of every dollar in the Company's hands in an}' way pertaining to 
his policy, in case he wishes to discontinue, forms the most 
valuable feature of the tontine and semi-tontine plans of life in- 
surance. On no other s} r stem is so sweeping a privilege obtaina- 
ble. The more this point is reflected upon, the greater the advan- 
tage appears which it confers. It is to be exercised many years 
in the future, and such far distant subjects usually attract little 
thought, but on each such policy the time will come when this 
privilege, inserted at the beginning in the contract, will be found 
of the utmost importance. ISTo one can now foretell his situation 
twenty years hence. He may need insurance then more than 
ever, or he may have no use for it at all. With this privilege, he 
finds himself on the one hand just as well off as if he had origin- 
ally taken the policy for a longer term, and on the other hand, as 
if he had chosen an endowment maturing at the time. The ton- 
tine or semi-tontine policy combines the advantages of the life 
policy and the endowment, being adapted at all points to the con- 
tingencies of the future. 

The Cheapest Form of Insurance. — Where a tontine or 
semi-tontin.e policy is surrendered at the end of the period and 
the cash value taken, and the holder compares his payments with 
the sum returned to him, whatever the latter ma} r be, he finds the 
net cost much less than he would have had to pay for the same 
insurance in the same company on any other plan. This is obvi- 
ous on the surface ; for he receives on surrender all the surplus, 
with interest, which would have been paid as dividends on the 
policy had it not been on the tontine plan, and also his share of 
the surplus, with interest, which would have been paid on the 
policies of members who have died qi* discontinued . 

Tontine insurance, more than any other system ever devised, 
equalizes the benefits of life insurance The heirs of those who 
die early get a large return in any event, even without dividends; 



42 THE THREE SYSTEMS 

while those who pay the longest, and have the premium paying 
burden of the whole period, receive all the dividends. 

Since the results of tontine policies are more advantageous 
pecuniarily than on any other class of policies in the same com- 
pany, the only question remaining for those who are satisfied of 
the benefits of the plan is, to choose that company which will 
afford him the best return for his money. 



SENATE RESOLUTION NO. 100. 



" Be it resolved, That the Insurance Commissioner of Ohio is 
hereby authorized and required, with three members (of this Sen- 
ate), to be appointed by the President of the Senate, to proceed 
at once to the states where such Tontine insurance companies are 
located and doing business in Ohio, and examine into and report 
to this Senate, if in session, and if not in session, to the Insur- 
ance Department. of Ohio, upon the matters relating to such com- 
panies, as hereinafter set forth. Said Committee, consisting of 
said Insurance Commissioner and Senators so appointed, shall 
have authority to procure such special assistant as shall be 
deemed advisable by them to cany out the provisions of this 
resolution." 

The above resolution was adopted in the Ohio Senate, April 
15, 1885. The matters about which investigation was to be made 
were as follows: 

" First — Specially as to the amount of insurance issued to the 
citizens of Ohio upon the Tontne plan. 

"Second— As to the amount of such Tontine fund placed to 
the credit of such policies. 

"Third- As to the mode of keeping the Tontine accounts with 
all the policy-holders, and whether such fund, or any part thereof, 
can be appropriated by the officers of such companies for any 
purpose other than the purpose originally intended, and whether 
such fund or any part thereof has been so appropriated or in 
any manner misapplied; and generally as to the plans and methods 
of doing business by such companies both at the home office and 
in Ohio through agencies. 

"Fourth— As to the credits of such companies upon policies 
of insurance, to be obtained, for the purpose of establishing a 
basis for taxation in Ohio." 

The committee appointed under the foregoing resolution were 
as follows: Hon. Henry J. Eeinmund, Superintendent of Insur- 
ance; Hon. S. P. Wolcott, Senator; Hon. Elmer White, Senator; 
Hon. A. C. Cable, Senator. Mr. Sheppard Homans, of New 
York, was appointed Special Assibtant to the Committee. 

The committee met at the office of the Equitable Life Assur- 
ance Society of the United States, at the company's building, 120 
Broadway, New York, May 29, 1885, and during their investiga- 
tions they examiried the following companies, designated in their 
report as 



OF LIFE INSURANCE. 

TABLE NO. 1. 



Tontine Companies doing business in Ohio. 



1. — iEtna, Hartford, Conn 

2.— Equitable, New York, N. Y 

3.— Home, Brooklyn, N. Y 

4.— Metropolitan, New York, N. Y. 
5.— Michigan Mutual, Detroit, Mich. 

6.— Mutual, New York, N. Y 

7.— New York, New York, N. Y.. . . 

8. — North- Western Mutual, Milwau- 
kee "Wis 

9. —Perm Mutual," Phila. ,' Pa. . '. . . '. '. '. 
10.— Union Mutual, Portland, Me. . . 
11.— United States, Xew York, N. Y. 



Designation of Policies. 



Terminable Endowments. 
Tontine and Semi-Tontine, 
Life-Rate Endowments, 
Reserve Endowments. 
Life-Rate Endowments. 
Five-year Distribution. 
Tontine and non-forfeiture 
Tontine. 

Tontine and Semi-Tontine. 
Life-Rate Endowment. 
Life-Rate Endowment. 
Tontine and Semi-Tontine. 



"Note. — In the Tontine list are included all those companies 
in which surplus is accumulated for a number of years for the 
benefit of persistent survivors." 



After finishing their labors two reports were made: one by the 
three senators, dated Columbus, Ohio, August 19, 1885; the other 
by Henry W. Reinmund, Superintendent of Insurance, and Shep- 
pard Homans, Actuary, assistant to Committee, dated Columbus, 
Ohio, August 21, 1885. These two reports agree substantially, 
on all points of vital importance, and, as the latter is more full, 
in some respects, we give it preference, not having the space for 
both. It is as follows: 

"The undersigned, while coinciding in the main with the 
views so well expressed by the Ohio Senators in the foregoing 
report, feel that in addition a resume or digest of the evidence 
obtained by the committee is desirable, for the information of the 
public. We bear cheerful testimony to the zeal and impartiality 
of the Senators, in securing information upon the important sub- 
ject confided to us by the Legislature. The committee sought, 
and obtained, wherever practicable, testimony from the oppo- 
nents as well as from the advocates of Tontine insurance, with 
the view of separating that which was the result of careful inves- 
tigation and accurate knowledge, from that which may properly 
be attributed to mere sentiment, or in some few cases to igno- 
rance or malice. The criticisms made by the opponents of the 
Tontine system of Life Insurance are mainly as follows: 

(1.) That it is a gambling scheme. 

(2.) That by harsh penalties in case of forfeiture it tends to 
deprive families of the protection which they otherwise would 
have obtained under ordinary policies. 

(3 ) That the expenses are greater in Tontine companies. 

(4.) That the accounts with Tontine policy-holders are im- 
perfectly kept, and that the funds may be misappropriated. 

(1.) As regards the charge that Tontine Insurance is a gam- 
bling scheme. — Gambling, as usually understood, is a scheme by 
which one gets something for nothing — where no valuable con- 
sideration is given by the winner to the loser — where the grain to 
one is precisely offset by the loss to the other— and where the 



44 THE THREE SYSTEMS 

gain or loss depends not on the will or power of either party, but 
rather upon mere chance or skill. It is usually condemned as a 
vice, as subversive of public morals, as wicked and unlawful. 
Nothing in the evidence obtained by the committee shows or even 
tends to show, that such grave charges can justly be brought 
against Tontine Life Insurance. On the contrary, the evidence 
clearly proves that Tontine Companies derive solid advantages 
from Tontine contracts, and can safely promise, and in fact do 
give great and solid benefit to Tontine policy-holders. Statistics 
abundantly prove, for instance, that when applicants for insur- 
ance deliberately elect to pay larger premiums than are absolutely 
necessary, as Tontine policy-holders do when they elect to for- 
bear the usual yearly dividends, they thereby give evidence, un- 
consciously perhaps, or by instinct, that they expect to live to 
enjoy the benefits promised in case of long life— in other words, 
they give evidence of superior vitality, which is more reliable in 
determining the value of the risk than the most skillful medical 
examination. It is clearly proven that the rates of mortality, 
and also the rates of lapses, or discontinuances, are far less among 
Tontine than among non-Tontine policy-holders. These consti- 
tute the solid advantages of Tontine contracts, and the companies 
can give, and in fact do give, in return, ample and compensating 
advantages in the way of larger dividends or surplus and larger 
surrender values than can be safely promised or given under or- 
dinary policies. 

Tontine and ordinary policies are precisely similar as regards 
the rates of premium charged, as regards the covenant b}^ the 
compan} 7 " to pay in full the sum insured, and as regards the non- 
payment of any surrender value until two or three years have 
elapsed. They differ only in the following respects: Under a full 
Tontine contract the right is waived (for valuable consideration) 
to any surrender value or to any dividend of surplus until the end 
of the Tontine periods elected. Under a non-forfeiting limited, 
or semi-Tontine contract, the same right to a surrender value is 
given that attaches to an ordinary policy, but the right is waived 
(for valuable consideration) to any dividend of surplus until the 
end of the Tontine period selected. In other words, these con- 
tracts differ only in the amount of the penalty exacted in case of 
discontinuance and in the periods agreed upon for distributions 
of surplus among policy-holders. 

No Life Insurance Company could, without endangering its 
safety, permit polkrv-holders to withdraw at will, in cash, their 
full reserves, or even a large fraction thereof, in case of ^sur- 
render, because in case of a panic, for instance, resulting from 
losses in investments or from excessive mortality during an epi- 
demic, the sound lives might withdraw, and only the impaired 
lives might remain. Without proper penalties to prevent sound 
lives from withdrawing, Life Insurance would be unsafe, and in 
fact impossible. 

Penalties for the non-performance of contracts are essential to 
the well being and security of society itself, and are by no 
means confined to Life Insurance. The company is bound by 
the strict letter of the policy contract. It cannot refuse to re- 
ceive a premium, even if the person insured were on the brink 
of the grave. The policy-holder, on the contrary, may discon- 
tinue at will, and usually the performance or non-performance on 
his part of the conditions of his contract depends upon his own 
volition. The penalty for discontinuance is greater upon Ton- 
tine than it is upon non-Tontine contracts, but the companies 
claim that in the former case the increased penalty is amply 



OF LIFE INSURANCE. 45 

offset by increased benefits. The difference is one of degree, not 
of kind. The principle is the same in both cases. 

A Tontine policy-holder is somewhat like a special partner put- 
ting C8] italinto a mercantile business for a term of years. He 
would not be allowed to withdraw his capital at will — that might 
ruin the business — but at the end of the partnership period he 
would have the right to withdraw his entire capital and his full 
sh^re of profits. A Life Insurance Company could not permit a 
policy holder to withdraw his full reserve at will, but by reason 
of the superior quality of Tontine risks, and as a proper compen- 
sation therefor, it can safely promise to pay in cash at the end of 
a long period, or periods named, in advance, the full reserve, in 
addition to the full share of surplus, in case of surrender. In 
other words, a Tontine policy-holder has the right, at stated 
times, to give up his insurance and withdraw his full equity in 
cash. This great advantage could not safely be promised under 
ordinary policies. 

No complaints have been made by beneficiaries under death 
claims of forfeiture penalties, and but few from those who have 
completed their Tontine periods. In ca-es of early deaths the 
investments have yielded many hundred, perhaps several thousand 
per cent. In case of long life and performance of the conditions 
of the contract, the investment will yield far more under a Ton- 
tine than under an ordinary contract. It is claimed by the advo- 
cates of Tontine Insurance, that the benefits as between the long- 
lived and the shortlived are thus equalized. Only those persons 
who break their contracts feel aggrieved by the heavy penalties. 
To such it has been unfortunate, and the' losses in many cases 
must have been heavy. There is no evidence, however, that 
there was any concealment by the company, or that the contract 
was not voluntary on the part of the applicant, or that he did not 
understand fully the penalties for non-performance as well as the 
benefits which might be expected from the performance of his 
contract. The applicant was left to select that form of insurance 
which he considered the best suited to his needs or his pocket. 
This is just as it should be. If an applicant has not confidence 
in his ability to keep up his premium payments, ordinary business 
prudence would impel him to select a semi-Tontine or an ordinary 
policy. If his object is simply to protect his family at the lowest 
outlay consistent with security, he may choose renewable term 
insurance where the investment element is eliminated. But as 
the senators well observed, he should not be deprived of his right 
to make his own selection. 

It may be added that Tontine Insurance is allowed and prac- 
ticed in every state in the Union, w T hile in some states — notably 
in New York— the essential conditions of that form of contract 
are sanctioned by distinct legislative enactments. 

(2). — As regards the charge that Tontine contracts tend to de- 
prive families of the protection which they otherwise would have 
obtained under ordinary policies. — The whole testimony obtained 
by the committee disproves this charge. The rates of discontinu- 
ances, except in the first two or three years when the conditions 
of the two contracts are similar, are far less among Tontine than 
among non-Tontine policies, and this is easily accounted for. 
The penalty in case of lapse, and the reward in case of persist- 
ence, are both greater. The definite promise to pay a large sum 
in cash at the end of the Tontine period, as surplus and guaran- 
teed surrender value, furnishes a substantial collateral, available, 
if necessary, to borrow money to pay premiums, and would thus 
enable a Tontine policy-holder to keep up his insurance when an 
ordinary policy-holder would be compelled to lapse, or to accept, 



46 THE THREE SYSTEMS 

(as a Semi-Tontine policy-holder might also do) a small paid-up 
insurance. Human nature is so weak that it often neglects duties 
which are for our own interest or benefit, unless there is a penalty 
for the non -performance, or a reward for the performance of the 
same. 

(3.). — As regards the charge that expenses are greater in Ton- 
tine Companies.— Here, again, the evidence and statistical in- 
formation disprove the charge. The heaviest expenses are gen- 
erally those incurred at the time the policy is issued, and the 
greater the volume of new business the greater the apparent ex- 
penses. The Tontine Companies issued seventy -four per cent, 
of the new insurances in 1884, but their expenses are actually 
smaller than those of the non-Tontine Companies when com- 
pared to new business, or to insurances in force when properly 
classified. 

(4.). — As regards the methods of keeping the accounts, and the 
proper application of the funds. — No evidence of wrong doing 
has been offered to the committee, or that the funds properly be- 
longing to Tontine policy-holders are not managed with fidelity 
and integrity, and are not held intact for the benefit of the proper 
beneficiaries. In fact, no charge or complaint of this nature has 
been made or is known to the committee as having been made 
against any company. In conclusion, the evidence obtained by 
the committt e demonstrates that the Tontine system of Life In 
surance is lawful ; that while the penalties exacted in case ot dis- 
continuance are greater than upon ordinary polices, the advan 
tages in case of continuance are also greater. These penalties 
differ in degree, not in kind, and hence the term gambling is no 
more applicable to Tontine than to non-Tontine Insurance, and 
in fact is applicable to neither. The fulfillment of the Tontine 
contract is encouraged rather than discouraged by these penalties, 
and the greater benefits given on these contracts. 

The companies generally might, with advantage, be more 
frank and full in statements to policy-holders affecting their in- 
terests ; or, in other words, might, with advantage, take policy- 
holders more fully into their confidence. The best way to dis- 
arm and dispel adverse criticism, whether proceeding from hon- 
est doubt or ignorance, is by the simple logic of facts and figures. 
Signed, Henry J. Reinmund, 

Superintendent of Insurance. 
Sheppard Homans, 
Actuary, Assistant to Committee. 

Columbus August 2, 1885. 

Extracts from the Testimony given to the Committee. 
Examination of the Equitable Life. 

"New York, May 29, 1885. 
Mr. Joel G. Van Cise, being duly sworn, testified as follows: 
(Examined by Mr. Homans). 

Q. You are one of the actuaries of the Equitable Society ? 

A. Yes. 

Q, For how long a time ? 

A. I have been connected with the Society for eighteen 
years this fall. I have been one of the actuaries for about four 
teen years. 



OF LIFE INSURANCE. 47 

Q. You have charge of the books and accounts and the cal- 
culations on Tontine policies ? 

A. Yes, sir. 

Q. Please read to the committee the printed statement which 
you have just handed to me. 

'As to policies in the Tontine classes, a special account is kept 
of the income and out go properly belonging to these classes sep- 
arate from the other business of the Society, so that the amount 
of the Tontine fund, that is, the share of the whole amount of 
assets properly belonging to policies in the Tontine classes, can 
be ascertained at the end of each year. To do this the Tontine 
fund is credited with all premiums received from Tontine policies, 
is charged with a due proportion of expenses upon these pre- 
miums, receives credit for interest upon its accumulations pro- 
portionate to that made on the total funds of the company, and 
has to pay the losses by death (occurring among the Tontine poli- 
cies only) and the claims of such policies as reach the end of tiieir 
Tontine periods. At the end of each year the total amount of 
the Tontine fund, and the total amount of reserve necessary to 
have on hand to secure the original and absolute obligations under 
the Tontine policies, is calculated and the difference between 
these amounts is the Tontine surplus, part of which belongs to 
the policies completing their Tontine periods in the year just en- 
tered upon, while a far larger part belongs to the far more numer- 
ous policies which will mature in the many succeeding years. As 
the Tontine policies, after completing their Tontine terms, leave 
the Tontine class and cannot participate in future divisions of 
surplus, the opportunity to correct in each future division any 
error made in previous distributions is taken away, and it is nec- 
essary to determine with accuracy the share of the surplus be- 
longing to the outgoing members of the Tontine class. It would 
have simplified the calculation, perhaps, to have made separate 
classes for each year of issue of policies with the same Tontine 
period, so that there would be no mingling of the claims of poli- 
cies leaving the class with the claims of policies having yet 
many years to remain in the class. But there was the insu- 
perable objection to this plan, that in small numbers and 
even in numbers of considerable magnitude, irregularities will 
arise very troublesome in practice and giving rise to grave sus- 
picions of unfairness, and it is therefore desirable in all life 
assurance calculations to take advantage of the largest averages 
attainable. It was therefore decided that all policies with the 
same length of Tontine period, no matter in what year issued, 
should be classified together for the purpose of determining the 
rate of dividends to be allowed, and the plan in detail was this: 
Rates of interest, of mortality, of lapses, and of management 
expenses, were assumed, approximating to the actual as nearly 
as possible. On the basis of these rates a calculation of what 



48 THE THREE SYSTEMS 

would be the surplus on policies taken out at every age and at 
the end of every year of their existence during the Tontine period 
was made, and tables of estimated surpluses for all possible con- 
tingencies formed. With these tables it is easy at the end of each 
year to calculate the expected surplus on each Tontine policy in 
force. The total of these expected surpluses, when compared 
with the total actual surplus as shown by the valuation of the 
Tontine policies, gives a ratio of the expected to the actual sur- 
plus; and applying this ratio to the estimated surplus by the 
tables on policies just maturing, we get the actual surplus to 
whi h they are entitled. The actual surplus for each policy 
whose Tontine term is not ended, could of course be calculated 
in the same way by applying the ratio to the estimated surplus 
on them as given b} r the tables; but as these policies cannot draw 
any surplus till their Tontine period is concluded, this detailed 
calculation would be useless; and it is sufficient to leave this sur- 
plus undisturbed to accumulate for another year when the same 
work of calculation and of distribution to the policies then matur- 
ing has to be repeated/ 

Q. I will ask you if that statement is a correct statement of 
the way in which you have made the estimates, made up the ac- 
counts, and credited individuals who are entitled to a credit under 
Tontine policies? 

A. Yes. 

Q. Has any departure ever been made in any Tontine policy 
or Tontine class, from the principles hud down in that printed 
statement? 

A. No, sir. 

Q. I would like to ask 3^011 if there has ever been any com- 
pulsion or persuasion on the part of the officers in the case of any 
individual policy, or any class of policies, to alter or depart from 
the principles, as laid down there ? 

A. No, sir. 

Q. And this printed statement, which is copied here, is the 
correct explanation of the method adopted by the Equitable 
Life Assurance Society, in dealing with all its Tontine policies? 

A. Yes, sir ; it is printed for the information of its policy- 
holders, on the Tontine plan. 

Q. By Mr. Homans : Am I correct in this : that in this com- 
pany the Mortality against Tontine policies only is charged 
against the Tontine fund, whereas, in the New York Life, for 
instance, they assume the average Mortality in the Company, and 
charge the average rate against the Tontine fund ? 

A. It is true that our Tontine policies and Tontine classes 
only pay the death losses occurring in those classes. That is 
true, according to our calculations. What you say in regard to 
the other Companies— the New York Life Company, for instance 



OF LIFE INSURANCE. 49 

—is substantially true. Their dividend calculations are based upon 
the fact of an average Mortality through the Company, whether 
it is Tontine or Ordinary Policies. The same is true with the 
Northwestern. 

Q, As I understand it, in the policy-contracts made with the 
Tontine policy-holders, you covenant to charge only the Mor- 
tality arising from members of the Tontine class ? 

A. I do not know that that is covenanted in the application 
of the policy, but it has been set forth in all our circulars and 
publications . 

Q. And in making these awards of surplus, you have had 
strict regard to that peculiarity ? 

A. Made the exact calculations ; charged only for the death 
losses actually paid. 

Q. One point of inquiry that is submitted to this committee, 
is not only the question as to how the Tontine accounts are kept, 
but the question is asked whether, in the appropriation of the 
surplus, any portion of the Tontine fund has been appropriated, 
or in any manner misapplied, contrary to the agreement ? 

A. Not one dollar. 

Q. And that in all the Tontine accounts you have put to the 
credit of the fund the total premiums received on Tontine poli- 
cies, you have charged that fund with the average expenses of 
the Society on its business, and with the actual death claims 
paid among the members of the Tontine fund, and have credited 
the fund with the average rate of interest received by the 
Society on its investments ? 

A. Yes, sir ; no departure has been made from that rule. 

From schedule "A" given by the New York Life to 
the Senate Committee, showing the comparative rate of dis- 
continuance of insurance — lapse — of Tontine and non-Tontine j 
made up from the company's actual experience for 10 years upon 
policies issued in 1872 and 1873, we obtain the following inter- 
esting and instructive facts : 

Amount of Tontine Insurance for which pre- 
miums were paid, first year $17,889,000 

Amount of non-Tontine Insurance for which 

premiums were paid, first year $19,748,000 

Total Tontine Insurance remaining in force, 
end of 10th year, (55 per cent, of original 
amount) , $9,865,000 

Total non-Tontine Insurance remaining in 
force, end of 10th year, (31 oer cent, of 
original amount) . . , 7. $6,064,000 

Prom schedule 'B" we gather the following facts with 
reference to dividends upon Tontine and Non-Tontine policies 
in Ohio, during a period of 10 years ; 



50 the three systems 

Example 1.— Policy No. 109,314 ; Amount, $3,000 ; date, 
Nov. 7, 1874 ; age of the insured, 31 ; Annual Premium, 
$70.05 ; Ordinary Life Tontine. 

(1.) — Premiums received in 10 years $700.50 

(2.) —Tontine dividends in 10 years 269.79 

Per cent, of (2) to (1), 38. 

Example 2.— Policy No. 118,402 ; Amount, $5,000 ; date, 
Feb. 28, L876 ; age, 31 ; Annual Premium, $116.75 ; Ordinary 
Life, Non-Tontine 

(1.)— Premiums received in 10 years $1,167.50 

(2.)— Dividends paid in 10 years. 184.49 

(3.)— Dividends paid at 6 % comp. interest 235.68 

Per cent, of (3 ) to (1), 20. 



Example 3. — Policy No. 111,458; Amount, $1,000; date, 
Feb. 23, 1875 ; age of the insured, 40 ; Annual Premium, 
$31.30 ; Ordinary Life, Tontine. 

(1.) — Premiums received in 10 years $313.00 

(2.)— Tontine dividends in 10 years 110.68 

Per cent, of (2) to (1), 35. 

Example 4.— Policy No. 117,137 ; Amount, $2,500 ; date, 
Dec. 18, 1875 ; age, 40 ; Annual Premium, $78.25 ; Ordinary 
Life, Non-Tontine. 

(1.) — Premiums received in 10 years $782.50 

(2.)— Dividends paid in 10 years 118.96 

(3.)— Dividends paid at 6 % comp. interest 151.73 

Per cent, of (3 ) to (1 ), 19. 



Example 5.— Policy No. 110,368 ; Amount, $3,000 ; date. 
Dec. 28, 1874 ; age of the insured, 54 ; Annual Premium, 
$171.06 ; Ordinary Life, Tontine. 

(1.) —Premiums received in 10 years $1,710.60 

(2.) —Tontine dividends in 10 years 610.00 

Percent, of (2) to (1), 36. 

Example 6.— Policy No. 116,177; amount, $1,000; date, Oct 
19, 1875 : age, 54; annual premium, $57.02; Ordinary Life, 
Non-Tontine. 

(1.) — Premiums received in 10 years $570.20 

(2.) —Dividends paid in 10 years 77.02 

(3.) —Dividends paid at 6 % comp. interest 97.78 

Percent, of (3 ) to (1), 17. 



Example 7. -Policy No. 111,776; amount, $1,000; date, 
March 10, 1875 ; age of the insured, 47 ; annual premium, $71.25 , 
10- Year Life, Tontine. 



OF LIFE INSURANCE. 



51 



(1.)— Premiums received in 10 years $712.50 

(2.)— Tontine dividends in 10 years 193.03 

Per cent, of (2 ) to (1), 27. 

Example 8.— Policy No. 89,074; amount, $2,000; date, May 
2, 1872 ; age, 46 ; annual premium, $138.52 ; 10- Year Life, 
Non-Tontine. 

(1.) — Premiums received in 10 years $1,385.20 

(2.) — Dividends paid in 10 years 163.12 

/ 3.)— Dividends paid at 6 % comp. interest 201.11 

Per cent, of (3 ) to (1), 15. 



Example 9.— Policy No. 107,789 ;. Amount, $2,000; date, 
Aug. 12, 1874 ; age of the insured, 30 ; Annual Premium, 
$60.72 ; 20-Year Life, Tontine. 

(1.) — Premiums received in 10 years. $607.20 

(2.)— Tontine Dividends in 10 years 219.60 

Per cent, of (2) to (1), 36. 

Example 10.— Policy 103,563 ; Amount, $3,000 ; date, Jan. 
14, 1874; age, 32 ; Annual Premium, $95.22 ; 20-Year Life, 
Non-Tontine. 

(1.) — Premiums received in 10 yeaxs $952.20 

(2.) — Dividends paid in 10 years 135.64 

(3.) — Dividends paid at 6 % comp. interest 170.68 

Per cent, of (3) to (1 ), 18. 



Example 11.— Policy No. 91,599 ; amount, $5,000 ; date, Aug. 
17, 1872; age of the insured, 30; annual premium, $242.65; 
20- Year Endowment, Tontine. 

(1.) — Premiums received in 10 years $2,426.50 

(2.)— Tontine dividends in 10 years 928.79 

Per cent, of (2) to (1), 38. 

Example 12.— Policy No. 88,387 ; amount $1,000 ; date, April 
5, 1872 ; age, 30 ; annual premium, $48.53 ; 20-Year Endow- 
ment, Non-Tontine. 

(1.)— Premiums received in 10 years. $485.30 

(2). — Dividends paid in 10 years 67.38 

(3). — Dividends paid at 6 % comp. interest. ..... 84.25 

Per cent, of (3 ) to (1 ), 17. 



The preceeding examples are given to illustrate the marked dif- 
ference between the dividends of the Tontine policies and those 
of non-Tontine policies, when issued at about the same age, on 
the same plan, and having been in force the same number of 
years. Comparing examples (1) and (2), it will be seen that the 



52 THE THREE SYSTEMS 

Tontine surplus on the former, at the end of 10 years, is 88 per 
cent, of all the premiums paid, while the dividends paid on the 
latter, the non-Tontine policy, improved by six per cent, com- 
pound interest, amount to only 20 per cent, of the premiums paid 
during the same number of years ! By comparing (3) with (4) ; 
(5) with (6); (7) with (8); (9) with (10), and (11) with (12), a corre- 
sponding marked difference is observed between the dividends of 
Non-Tontine, and the accumulated surpluses of Tontine, 
policies, in the same company. In another company, while the 
per cent, of difference between the Tontine and non-Tontine 
policies might not vary materially from that shown above, yet 
the dividends themselves might possibly be very much less, 
or considerably greater, than those shown in these examples, on 
the same kind of policies issued at the same ages, and having 
been in force the same number of years. Leaving out the Massa- 
chusetts companies, nearly all the Life Companies doing business 
in the United States have incorporated, in one way or another, 
the Tontine principle, and, if one wants a Tontine policy, he 
should exercise a reasonable amount of caution and good com- 
mon sense in the selection of a company. A company that gives 
large dividends on the ordinary kinds of policies can give much 
larger on the same kinds when Tontined; and, a company that 
pays but meagre dividends on the usual forms, adopting perhaps 
the Tontine system to " cover up " its small surpluses, cannot be 
relied on for large returns of surplus under the Tontine forms of 
insurance. 

Premiums. — The sums required to keep a policy in force, 
according to its conditions. In "The Level Premium System " 
of Life Insurance, every premium is composed of three elements, 
the Reserve Element, the Mortality Element, and the Expense 
Element. The annual premium on an Ordinary Life Policy, 
for $10,000, at the age of 85, is, say, $264.90. This is made up as 
follows : 

1. The Reserve Element $110.39 

2. The Mortality Element 88.27 

3. The Expense Element 66.24 

Gross Premium $264.90 

See page 61, for a full explanation of each of these ele- 
ments. The three elements combined make up what is called the 
gross premium. The first two elements, combined, amounting to 
$198.66, make what is called the net premium; and similarly 
with reference to any other premium for any kind of a policy 
issued under The Level Premium System. 

Premium Notes. — Notes given by policy-holders, in lieu of 
a part of the cash payment of the premium. These, if not paid 



OF LIFE INSURANCE. 58 

or canceled by future dividends, are usually deducted from the 
amount issued in case of death, or at the maturity of an endow- 
ment. 

Surplus. — The sum left, after providing for the liabilities — 
present and prospective— of a company. 

Value of a Policy— The Reserve.— The net value of a 
policy is the difference between the net single premium for 
the sum insured at the age of the policy holder, when the 
policy is valued, and the present value of all future net 
premiums calculated to be received. The gross value of a policy 
is the difference between the net single premium, as given above, 
and the present value of all future gross premiums to be re- 
ceived on the policy. 

Owing to a fixed law governing these reserves, life insurance 
mathematics enables one familiar with it to tell, not only the 
present, but also the future, net value of any kind of a policy. 
A tabulated statement of the yearly net values, from the present 
to any future date, is called an "Abstract of Net Values" for 
that policy. Some of the advantages of such an abstract are : 

1. It names the amount of cash held by a company in 
the " Reserve Accumulations" from year to year, to the credit 
of a policy, for a term of years. 

2. It indicates the equitable cash surrender value of a 
policy, from year to year, for a designated period of time, com- 
mencing with the present. The cash surrender value is generally 
from 30 to 95 per cent, of the reserve accumulations. 

3. It indicates the amount of paid-up insurance that 
should be given, if desired, in exchange for the original policy. 

4 It indicates the amount of cash loan that could safely 
be made on a policy, if assignable, as collateral security; one- 
half to three-fourths of the reserve accumulations would be a safe 
loan. 

5. It is a safe guide to a correct decision on any proposed 
changes affecting present insurance. 

6. It enables one to closely approximate the loss on a ton- 
tine policy, if the required number of premiums be not paid, as 
specified in the contract. 

7 . It gives a correct basis for dividends, if any, paid 
by companies in the hands of Receivers. 

8. Such an Abstract makes its owner thoroughly intelli- 
gent, at all times, with reference to his Insurance. It is protec- 
tion to the insured ; it is protection to his family. 

9. Without one of these Abstracts, for each policy in 
force, one possesses property the cash value of which he knows 



54 THE THREE SYSTEMS 

little or nothing. He is annually making cash deposits with no 
definite information as to the balances in his favor. The cost 
of insurance is the difference between the actual amount of 
cash premiums paid and the cash surrender value of the reserve 
accumulations to the credit of the policy. One is supposed to 
know what he has paid. An Abstract tells him the amount of his 
reserve accumulations. 



LIFE INSURANCE FAILURES. 

In a pamphlet, entitled " Life Insurance ; its history in 
the United States during* the last half century." Pub- 
lished by the Globe Newspaper Company, Boston, Mass. 1885, 
is the following : 

4 'In 1860 there were but fifteen Life Insurance Companies doing 
business in the country, and all but two of these companies are 
doing business now. In 1865 the numberhad increased to twenty- 
five. Fomthis time there was a perfect deluge of additions to 
the companies. By 1871 there were seventy-two con panies try- 
ing to do a business, which might well have been left to the orig- 
inal fifteen. There seemed to be a perfect craze. Each city must 
have its Life Insurance Company, and one being organized an- 
other must become its rival. Men who had failed in everything 
else thought that because there had never been a failure in Life 
Insurance it was their field. Men who knew nothing about the 
business organized companies, bought furniture and books, and 
set up shop as a Life Insurance Company. The business was 
tampered with to an extent which had never fallen to the lot of 
any other business. Of the seventy-two companies in 1871, it 
is probable that not thirty of these had educated Life Insurance 
men at their heads. What could one expect as a result of this 
craze? Could one suppose that it would meet a fate different 
from that of all other business handled by men who know noth- 
ing of it? Let any sensible man answer the questions. Could 
one have expected these companies to succeed? People do not 
buy their hats of shoemakers, nor do they buy shoes of tailors. 
A farmer or a butcher could undoubtedly cut off a leg, but he 
would be sure to kill his patient, A well educated physician 
would surely make a failure in trying an intricate law case, and 
an expert attorney would doubtless be capsized in trying to sail 
a boat. The trouble, and the sole trouble with the mushroom 
Life Insurance Companies was that men undertook to do what 
they did not know how-to do, and they failed, just as it was cer- 
tain that they would fail." 

"Taking every organization that ever did any business in Life 
Insurance, and the record is that seventy-seven companies have 
been in the business that are not now in the business. These com- 
panies are as follows : (Here is a list of these companies.) 
There have been a few other futile attempts to establish a Life 
Insurance Company, but the foregoing is a list of the companies 
that came before the public for business, and that did business of 
any consequence. " 

" Some of the above-named companies failed outright, some of 
them reinsured their risks in other companies, which afterwards 
failed, others of them reinsured their risks in companies which 



OF LIFE INSURANCE. 55 

are solvent and which have carried out all of the original con- 
tracts and some of them did not do any business at all. The fol- 
lowing table shows the assets of fifteen of the larger of the com 
paniesatthe last annual report, before they ceased business. The 
assets of the other companies are stated with just as much preci- 
sion, but are placed in one sum: 

Knickerbocker, N. Y $6,033,231 

North American, N. Y 5,789,074 

Globe, N. Y 3,613,291 

Continental, N. Y. 6,229,484 

Security, N. T (.. 3,683,186 

Life Association, Mo 3,043,538 

St. Louis Mutual, Mo 6,195,329 

Universal, N. Y 3,542,320 

Guardian, N. Y 3,976,976 

New Jersey Mutual, N. J 1,808,882 

Atlantic Mutual N. Y 1,252,016 

Widows' and Orphans', N. Y 1,599,068 

Eepublic, 111 2,034,541 

World, N. Y 344,258 

All other companies 11,493 145 

Total $60 638,339 



"It will thus be seen that the total assets of all the companies 
that have failed in this country, given in the last annual report 
before they failed, was about §60,000,000. But, as before said, in 
a number of cases the risks were safely reinsured in other com- 
panies. The amount of these reinsurances, at a safe estimate, 
would reduce the amount to $40,000,000. Then, again, the fail- 
ures were not absolute. In some cases nearly the whole liability 
was saved. In others a large portion was saved. It is not prob- 
able that over half the amount was really lost. Still, it may be, 
and probably is, true that $25,000,000 have been lost by those 
Life Insurance Companies that failed." 

"When we look at the enormous business of Life Insurance in 
this country, and at the great good it has accomplished, the life 
insurance failures seem very small compared with the failures of 
banks in the last forty years, or with failures in any other class 
of business, the amount is small indeed." 

The article then goes on to state the amount of losses that 
these companies paid while doing business. They are given in 
detail and amount to $41,208,015. It concludes with the 
following: 

" Compare the amount of money lost by Life Insurance Com- 
panies which have failed, and the good accomplished by these 
very companies in the payment of over $41,000,000 of losses, and 
give credit where credit is due. Can any other business show as 
much good accomplished where the business has resulted in fail- 
ure? But there is another perfectly just way to look at the 
money lost by failed Life Insurance Companies. It is a large 
estimate to call the amount $25,000,000. The Life Insurance 
Companies, as has been shown previously, have assets of about 
$500,000,000. They have paid dividends of about $250,000,000, 
and they have paid in purchase of policies before maturity aboufc 
$150,000,000. If this amount be added to the amount used in 



56 THE THREE SYSTEMS 

expenses of management, we may say that the Life Insurance 
Companies of this country have ' handled about $1,500,000,000, 
and that, in doing so, some inexperienced men, who engaged in 
the business and failed, lost $25,000,000. Take the business in 
any way, look at it from all sides, and then make the record, and 
tell the results . 

" Let the record be told as it is. Say it boldly, Between one 
and two per cent, of the money handled by the Life Insurance 
Companies has been lost by bad management. If the wisest men 
in the world had conducted all of the business, we could not 
have expected better results. Let any man who is disaffected as 
to life insurance, because some companies have failed, look at 
the facts as they are, and he will forever after compliment the 
business rather than criticise it adversely. The result is in favor 
of the business. It is complimentary in every way." 



LIFE INSURANCE EXPENSES. 

The following figures with reference to the comparative ex- 
pense of Life and Fire Insurance companies are compiled from 
tables found in the Insurance Year Book, 1885-6; those referring 
to Railroad corporations, from Poor's Manual, 1885: 

Total income of 47 American Life In- 
surance Companies, from 1879 to 

1884, inclusive, six years $532,899,994 

Total premium income for the same time 377,639,310 

Total expenses for the same time . . 77,217,951 

Ratio of expenses to total income 14^ per cent. 

Ratio of expenses to premium income 20§ per cent. 

Total income of 311 American Fire 
and Marine Insurance Compa- 
nies, from 1879 to 1884, inclusive, six 

years $84,505,401 

Total expenses for the same time 26,877,298 

Ratio of expenses to total income 31| per cent. 

Total income of 24 Foreign Fire and 
Marine Insurance Companies 
doing business in the United States 

from 1879 to 1884, six years $26,322,374 

Total expense for the same time 8,107,447 

Ratio of expenses to total income 30 & per cent. 

Total gross traffic earnings of the Railroad 
companies of the United States from 
1880 to 1884, inclusive— five years. . $3,680,182,328 

Total net traffic earnings the same time. . . 1,369,754,581 



OF LIFE INSURANCE. 57 

Total expenses for same time 2,310,424,742 

Ratio of expenses to gross traffic earnings. 62| per cent. 

The Hon. Blizur 'Wright, in 1863, said: 

" The proper office expenses of the companies, apart from 
the use of the press to enlighten the public mind, are usually very- 
moderate compared with those of most other moneyed corpora- 
tions. To these must be added taxes and legal expenses, indis- 
pensable to protect the common fund against the raids of fraud." 

Also the following: 

(t The expenses of management do not ordinarily increase in 
proportion to the business, but it is in the largest companies 
that the largest percentage of the premium has either returned to 
the policy-holders or is accumulated for their benefit/' 

These statement are doubtless as true to-day as in 1863, as 
shown by the comparison just made of the expenses of Life 
Insurance companies with those of Fire and Marine compa- 
nies and Railroad companies. But, as a safe test of the economy 
of one life insurance company with that of another, in matters of 
expense, the comparison of expenses with total or premium in- 
come is questioned by some of our best thinkers on the subject. 

Mr. "Wright said, in 1873 : 

" When two companies are to be compared in regard to the 
economy of their working expenses, comparing their respective 
ratios of expense to either total or premium receipts is about 
as idle as it would be to count the buttons on the clothing of 
their respective presidents." 

One of the oldest, most conservative, and best managed Life 
Insurance companies in the United States takes the position that 
the ratio of gross insurance expenses to net insur- 
ance claims met, during any year, is the only dearly intelli- 
gible and scientific test of the economy of expenses. The company 
illustrates this new test by reference to its own record of business 
in 1884, as follows: 

Gross expenses $360,170.17 

Deduct investment expenses 74,757.00 

(1) Gross insurance expenses 285,413.17 

Gross death claims 973,693.00 

Deduct the part paid hy premium reserve 328,217.49 

(2) Net death or insurance claim 645,475.51 

Exact ration of (1) to (2) 44.2 per cent, 

" An inspection of these figures is sufficient to show the prin- 
ciple involved, which is simpl}- to distinguish insurance from in- 



58 THE THREE SYSTEMS 

vestment expenses, so that it may be seen that each branch of 
business has been conducted with due economy. " 

"Under ordinary circumstances, insurance expenses ap- 
proaching the full value of insurance furnished, or amount of 
insurance claims paid, should be regarded as extravagant ; and 
investment expenses so large as to defeat the realization of a 
fair rate of interest on investments should also be so regarded." 

This new test is further illustrated by the company, as 
follows: 

"This company's ratio of gross expenses to gross income for 
1882 was 12.7 per cent., and to the mean amount of its policies 
in force, 0.57 per cent. The reader will at once perceive that 
these figures convey no conclusive or practical idea to him, such 
as he is given when he is informed that the Insurance Expenses 
bear a certain proportion to the Insurance Claims Paid. Ex- 
penses may be incurred by a company amounting in a given year 
to more than 100 per cent, of the insurance claims paid, or real in- 
surance service rendered by it, in the same year, which, of course, 
would be highly extravagant, and yet the extravagance might 
escape detection in a comparison with income, or the amount of 
policies in force ; for the amount of expenses, notwithstanding 
their extravagance, would still be far below either of these 
amounts." 

In illustration of the unreliability of the ratio of gross ex- 
penses to gross receipts or premium income, as a test of the 
economy of one Life Insurance Company as compared with 
another, the reader is referred to the official report of the Insur- 
ance Commissioner of Massachusetts, Jan. 1, 1874, pages xxxii to 
xxxvi, inclusive. In the example there cited, b} r a skillful mani- 
pulation of figures, the ratio of expenses to gross receipts was 
reduced from 14.33, the correct ratio, to 8.76 per cent.; and the 
ratio of expenses to premium receipts was reduced from 20. 16, 
the correct ratio, to 10.6 per cent. ! 



OF LIFE INSURANCE. 59 



CHAPTER VI. 



The Letel Premium System. — Its Distinguishing Charac- 
teristics.— Requisites for Soundness and Permanency.— 
Analysis of a Premium.— The Reserve Element. — The 
Mortality Element. — The Expense Element. — Sources 
of Dividends. 

SYSTEMS OF LIFE INSURANCE. 

Three systems of Life Insurance are operated in this country 
uDder the protection of law. They are The Level Premium 
System, sometimes called "Old Line";The Natural Pre- 
mium System, and The Assessment System. These are 
discussed in the following pages in the order named. 

I. The Level Premium System. 

Distinguishing Characteristics . 

1. The premium is required to be paid in advance. 

2. The contract between the company and the in- 

sured is called a "policy:' 

3. The policy always designates a definite sum to 

be paid by the Company to the beneficiary, 
or beneficiaries, named therein. 

4. The premium is a " level premium ;" that is, it is 

the same from year to year, during* the pre- 
mium paying- period, unless reduced by dividends. 

5. The policy-holder is never insured for the full 

face value of his policy and additions. His 
insurance is only for a sum equal in amount 
to the difference of these and their reserves. 

Requisites for Soundness and Permanency. 

a.— The premium must be based on safe assumptions 
• of future mortality, interest and expenses. 



60 THE THREE SYSTEMS 

To illustrate.— Let it be required to make an annual premium, 
at age 40, for $1,000 of insurance, on the Ordinary Life Plan, 
basing it on the Actuaries' Table of Mortality and 4 per cent, in- 
terest. It is first assumed that, of the 78,653 persons living, at 
age 40, at the beginning of the year, 815 will be dead at the end 
of the year, and, also, that the number living and dying every 
year, thereafter, will be as represented in the table. Theassump 
tion is that the future mortality of the Company will be as thus 
represented and this assumption is regarded, by all com- 
petent actuaries, the world over, as a perfectly safe one. It is 
also assumed that 4 per cent, compound interest will be received, 
by the company, on the reserve accumulations of the policy, and 
this is also regarded as a safe assumption. On these assump- 
tions of future mortality and interest, by a process not necessary 
to explain here, the net annual premium is found to be $23.68. 
It is then assumed that $7.89, annually, will be a safe contribu- 
tion for expenses. Adding these two, the result is $31.57, which 
is the gross annual premium, at age 40, for $1,000 of insurance, 
during life. The assumption of future expenses is entirety arbi- 
trary and varies with different companies, ranging from 25 to 
40 per cent, of the net premium. 

&.— The Company must have in hand, from year to 
year, the accumulations of reserve provided by 
law, safely invested in securities earning a rate 
of interest not less than that assumed in making* 
the premium. If a higher rate be realized, a divi- 
dend can be paid. 

To illustrate. — Suppose that the insured is 40 years old at the 
beginning of the first policy year; that the policy is for $1,000, 
Ordinary Life, and that the premium is based on the Actuaries' 
Table of Mortality, and 4 per cent, interest. The net annual 
premium is $23.68, and it is also the required legal reserve, at 
this, the beginning of the first year; but it gradually diminishes 
until, at the end of the year, it is only $14.41. The difference be- 
tween the legal reserve at the beginning, and at the end of the 
year, — $9.27 — , is supposed to have been used in payment of 
death claims. At the beginning of the second policy year, after 
the premium for the year has been paid, the net annual premium, 
— always $23.68 — , is added to the legal reserve at the end of the 
first policy year, $14.41, making $38.09, which is the required 
legal reserve at the beginning of the second policy year. This, 
also, as during the first year, gradually diminishes, until, at the 
end of the year, it is $29.31, which is the legal reserve at the end 
of the second, policy year ; and so on. It will be noticed that the 
legal reserve at the end of any policy year is always larger than it 
was, at the end of the last preceding year; and, also, that the re- 



OF LIFE INSURANCE. 61 

serve, at the end of any policy year added to the uniform net 
annual premium, at the age when the policy was issued, gives the 
legal reserve at the beginning of the next policy year. At the 
end of the first policy year, as has been shown, the legal reserve 
is $14.41; at the end of the second policy year it is $29.31, gradu- 
ally increasing from year to year, until at the age of 100— in case 
of a life policy, based on the Actuaries' Table of Mortality — it is 
equal to the face value of the policy. 

c — Grood Management. 

Under the Level Premium System the larger and more promi- 
nent companies, both in this and in foreign countries, are doing 
business. For convenient illustration, let it be assumed that a 
policy of $10,000, Ordinary Life plan, annual premium $264.90, 
has been issued on a life at age 35. This premium, the first 
year, is composed of the following elements, premising that it is 
based on the Actuaries' Table of Mortality, and four per cent, 
interest: 

1. The Reserve Element $110.39 

2. The Mortality Element 88.27 

3. The Expense Element 66.24 

Gross Premium $264.90 



The Reserve Element. — Upon payment of the first annual 
premium of a Level Premium Policy, insurance law and mathe- 
matics require that a part of it shall be invested by the company 
and compounded, annually, at a certain rate of interest — usually 
four, or four and one-half per cent. — until the policy becomes a 
claim by death or maturity. Then it is applied in part payment 
of the claim. A part of every succeeding year's premium is 
also required to be thus invested. The accumulation of these 
investments is technically called ie the reserve." This reserve be- 
comes larger and" larger the longer the policy remains in force, 
until it equals in amount the face value of the policy, at age 96 
or 100, if a life policy ; or, at the end ot the endowment term, if 
an endowment policy. A Level Premium Company, not having 
in hand the reserve prescribed by the state from which it received 
its charter is not solvent, and, when it would enter other states 
for business it must comply with the reserve laws of those states. 

The reserve should not be confounded with surplus. It is not 
surplus. It may produce surplus, as will be seen further on. The 
reserve can be used for no purpose whatever while the original 
policy is in force, except for accumulation. If a note has been 
given in part or full payment of a premium, it is a part of the 
reserve. If a policy were to be sold, to the company or another 
party, the reserve, at date of sale, indicates its cash value. If the 



62 the thkee systems 

original policy were to be exchanged for a similar, smaller one, a 
pai [ up, one upon which further payment of premiums would not 
be required, the reserve determines the amount of such paid-up. 
It would be what the reserve would pay for at your then age, 
according to the rules of the company. 

By referring to Table No. 19, it will be seen that the reserve 
on the assumed policy, at the end of the first year, is $114.81, 
and at the end of the 65th year, $10,000. If the policy were for 
a different amount ; or, for the same amount at a different age ; 
or, in general, if the age, kind or amount of policy, either or all 
of these were different in any respect, then the reserve would be 
different. It is assumed that the reserve on this policy will earn 
four per cent, compound interest ; that, during the first policy 
year, $88.27 will be used in payment of death claims, and $66.24 
for expenses, and similar amounts every year thereafter. If 
these assumptions be realized, no more and no less, and no divi- 
dends or profits accrue from other sources to reduce the premi- 
ums, then the insured will pay the Level Premium of $264.90, 
every year, during life. Thus paying, for the whole term of life, 
he w r ill be insured, not for $10,000, but as follows : At the end of 
the first policy year, $9,885.19 ; at the end of the tenth year, 
$8,665.88 ; at the end of the fifteenth year, $7,857.00 ; at the end 
of the thirtieth year, $5,153.62, and so on, for a decreasing 
amount, year after year, until, at the end of the sixty-fifth year, 
at the age of 100, he will have no insurance, as the reserve will 
then just exactly equal the face value of the policy. It is a very 
remarkable characteristic, therefore, of "The Level Premium 
System ", that a policy-holder is never insured for the full face 
value of his policy and additions ! His insurance is only for a 
sum equal in amount to the difference of these and their reserves. 

Twenty-seven Level Premium Life Companies reported to the 
Massachusetts Insurance Department, Dec. 31, 1884. According 
to their sworn statements, in these reports, their net total assets 
amounted to $469,898,831. Their reserves amounted to $418, 
285,178! The reserves, therefore, constituted nearly ninety per 
cent, of their assets ! ' 

Amzi Dodd, president of The Mutual Benefit Life In- 
surance Company, of Newark, New Jersey, one of the largest 
and oldest Level Premium Companies in the United States, in his 
Annual Report, Jany. 1, 1883, says, with reference to the reserve 
accumulations of companies, as follows: 

" In regard to this fund a few explanatory words may be use- 
ful. Each policy is credited on the company's books with a sepa- 
rate reserve, according to its age, kind and amount. It arises 
from the simple circumstance that the risk of death (and, there- 
fore, the cost of insurance) increases with each year of life, 
while the premium which is paid on the policy differs in amount 
from the cost of insurance. Out of 1,000 persons, living at the 
age of 35, our American Experience Table of Mortality shows 



OP LIFE INSURANCE . 63 

that nine will die in the ensuing year. Out of 1,000 living at the 
age of 45, eleven will die ; out of 1,000, at 55, eighteen; out of 
1,000, at 65, forty ; out of 1000, at 70, sixty -two ; out of 1,000, at 
80, one hundred and forty-five ; at 85, two hundred and thirty- 
six ; at 90, four hundred and fifty four ; at 92, six hundred and 
thirty-five ; at 94, eight hundred and fifty seven ; at 95, one thou- 
sand — that is to say, by the table, life is not extended beyond 96. 
"From the above figures it appears how the cost of insurance 
increases } r early. This increasing cost would be the natural 
premium. For the sake of convenience, the sum ordinarily 
agreed to be paid in each year, is different, and is called the arti- 
ficial premium. During many years after the policy is issued, 
the artificial premium is. greater than the natural, and in after 
years it is less. In case of a policy issued at the age of 35, the 
artificial premium is greater than the cost of insurance till the in- 
sured reaches the age of 56. After that age it grows rapidly less. 

"Out of this state of things arises the whole matter of 
reserves, so fundamental and so much discussed in Life Insur- 
ance. Simple as it is when stated, it is remarkable how often it 
is imperfectly, or obscurely conceived. If the policy contract, 
instead of calling for the same premium each year, should call for 
the gradually increasing natural premium, there would be no 
need of reserves or accumulated funds. The Company and its 
members would do business on the rule of " pay as you go." 
The policy-holder would get yearly the equivalent of his money 
paid. But under the system almost universally in use he pays 
largely in advance, and the Company holds the money to offset 
against insurance in after years, when the insured does not wish 
to be called on for larger payments. The reserve fund thus aris- 
ing is sometimes called the wealth of Life Insurance Companies. 
It is obviously not such ; but a debt from the corporation to its 
members : a great trust fund confided to the managers. 

" The foregoing will serve to indicate several points to which 
only a brief reference need now be made : Firstly— The para- 
mount importance of keeping an ample reserve fund securely in- 
vested. It is vital to the fulfillment of the company's contracts 
with its members. Secondly — Why it is that a company should 
make an equitable allowance for the value of a policy when the 
holder can no longer pay premiums, or from any cause discon- 
tinues them. The company has in its hands a 'reserve for the 
policy, the most of which it can return either in cash or in the 
form of insurance, without injury to its other members or policy- 
holders. The reserve is held for the future needs of the policy, 
and when, such needs cease to exist a fair return can be made/' 

The Mortality Element.— The name sufficiently indicates 
its use. In the premiums under analysis, it is $88.27 the first 
year. Theoretically , this is the maximum amount chargeable to 
the insured, in any one year, as his contribution to the death 
fund, but, practically, this element of the premium and the ex- 
pense element are merged together. Sometimes the death rate is 
in excess of that assumed, and the expense element is drawn upon 
to make up the deficiency, and vice versa. 

Column (3), Table No. 19, shows the amount of insurance, 
from year to year, that the company has at risk on the assumed 
policv. It is at all times the excess of the face value of the 
policy over the reserve in hand. When the insured dies, this ex- 



64 THE THREE SYSTEMS 

cess or amount at risk is paid from the Mortality Elements of the 
premiums of surviving policy-holders. To illustrate, suppose 
death occurs at the end of the tenth policy year. The reserve is 
$1,334.12. This lacks $8,665.88 of paying the $10,000. This de- 
ficit, therefore, must be paid from the Mortality Elements of the 
surviving policy-holders' premiums, as stated before. 

According to the Actuaries' Table of Mortality the cost of in- 
surance, at age 35, is only $9.29 for each $1,000. At age 50, it is 
$15.94 ; at age 60, it is $30.34 ; at age 70, it is $64.93 ; at age 80, 
it is $140.41 ; at age 90, it is $323.73 ; and at age 99, it is $1,000 
for $1,000 of insurance ! From this it is seen that, if no accumu 
lations were held in reserve, under The Level Premium System, 
the death rate would eventually be so large that the entire pre 
mium, — the three elements combined — , would be insufficient for 
the payment of death losses, alone, saying nothing of expenses. 
But the constantly increasing reserve is continually diminishing 
the amount of insurance at risk, so that the decrease of risk neu- 
tralizes the increase of mortality. 

The Expense Element.— "The net premium/' says Gusta- 
vus W. Smith, "is the amount that will, on the designated data 
— namely, rate of interest and table of mortality — exactly effect 
the insurance." 

"Loading" — The Expense Element,—, says Elizur Wright, 
"is the addition which is made to the 'net premium/ to provide 
for commissions and other working expenses, and for occasional 
excesses of mortuary loss." 

In the premium under analysis the expense element is $66.24. 
This is the assumed, maximum, annual charge against the in- 
sured for expenses. By adding the reserve and Mortality Ele- 
ments of any premium, we obtain what is called the " net pre- 
mium" which, in the example' selected, is $198.66 ; then, by 
adding The Expense Element, we obtain the Gross Premium of 
$264.90. Net premiums,— age, kind and amount of insurance 
being the same, — are the same in all Level Premium Companies 
that base their rates on the same Mortality Table and rate of in- 
terest ; but the Gross Premiums are most always different, be- 
cause of the difference of the Expense Elements. Of two Level 
Premium Companies, one has been charging a Gross Premium of 
$313.00, and the other only $266.10, for $10,000 of insurance, 
life plan, age 40, the first year. Their net premiums are the 
same, but the Expense Element of the former is $89.46, while 
that of the latter is only $42.56. The dividends at the end of the 
first year, if used in part payment of premiums, would possibly 
reduce the second year's payment in each to about the same 
amount, and, after a few years, the higher price company, at first, 
might prove to be less expensive in the long run. 

The Reserve and Mortality Elements are determined by care- 



OK LIKE INSURAKCE. 65 

ful mathematical calculations, while the Expense Element, or 
" loading," as it is technically called, is entirely arbitrary. 



SOURCES OF DIVIDENDS. 

In the Level Premium System. 

1.— Dividends arising* from having received a 
higher rate of interest on the reserves than that as- 
sumed.— It has been stated that the reserves of every company 
must be invested and compounded annually, at a certain rate of 
interest, fixed by law. In the example selected, we assume the 
rate to be four per cent. If only four per cent, be realized, there 
can be no dividends from this source. But, suppose, for illustra- 
tion, that the reserve earns six per cent, compound interest, or 
two per cent, more than that assumed. By referring to col. (5), 
table No. 19, it will be seen that this gives a dividend, end of 1st 
year, of $2.30; end of 5th year, $12.26; end of 10th year, $26.68; 
end of loth year, $42.86; end of 20th year, $60.26; end of 25th 
year, $78.50; end of 30th year, $96.92; end of 35th year, $114.64 ; 
end of 40th year, $131.00; end of 45th year, $145.62; and at the 
end of the 65th year, $200!! Columns (4), (6), and (7) show what 
the dividends would be if the reserves were to earn five, seven or 
eight per cent, compound interest. One of our most prominent 
Life companies realized an annual average of eight and one- 
quarter per cent, compound interest on its reserves, from 1872 to 
1883; but in 1883 it was onty a trifle more than six and three- 
fourths per cent., which, although much reduced, was very high 
in comparison with that of some other older companies. Another 
company that received seven and one-fifth per cent, interest on its 
reserves in 1873, realized less than five per cent, in 1883! This 
reduction of interest has but little effect on the dividends of poli- 
cies that have been in force only a few years, when the reserves 
are comparatively small; but, on old policies with large reserves 
there has been a marked reduction of dividends. The companies 
should not be censured as it could not be avoided. Agents and 
solicitors of comparatively young companies have sometimes 
seized upon the fact of this large reduction of dividends on old 
policies in the older companies, and made it the basis of severe 
and unjust criticism by comparing recent, with former dividends 
on the same policies before interest had dropped. 

The reserves of the Level premium companies doing business 
in Massachusetts last year, as shown by official reports, Dec. 31, 
1884, amounted to $418,285,178. If only five per cent, interest be 
realized on these reserves during the present year, the dividends 
resulting therefrom will amount to over four millions of dollars; 
if six per cent, be realized, the dividends will be more than eight 
and dne- third millions of dollars; and, if the reserves earn seven 



66 THE THREE SYSTEMS 

per cent, the dividends will be over twelve and one-half millions 
of dollars! 7 

2.— Dividends arising 1 from having experienced a, 
less mortality than assumed.— The mortality element of p 
premium is the assumed maximum annual contribution of the 
insured for the payment of death losses. In the premium undei 
analysis it is $88.27 If it be not all used for that purpose, the 
unused portion will be returned to the policy-holder at the end of 
the policy year, improved by interest, as an element of his divi- 
dend for that year. Dividends from this source, in our best con- 
ducted companies, where extreme care has been exercised in the 
selection of sound lives, have been quite large, amounting some 
years to twenty or even thirty per cent, of the assumed mortality. 
So long as the actual mortality, among the members of a com- 
pany, is less than the mortality indicated by the table upon which 
its premiums are based, there will be a constant annual surplus 
for dividends from this source. If a company be National in 
character, with its business sufficiently large for a safe average, 
and quite evenly distributed over the whole country, there need 
be no apprehensions of serious trouble from epidemics, wars, 
earthquakes, etc., etc. The great law of mortality operates with 
as much precision as the laws of light, heat, electricity and gravi- 
tation. 

Several years ago a special agent of a New York company was 
sent on business to one of its General Agencies in New England. 
While there, the General Agent remarked that he had one 
policy-holder who was always grumbling. His policy was for 
only $1,000, but his fruitful imagination was constantly conjuring 
up something that might possibly happen to the company and his 
policy thereby become worthless. Sometimes it was one thing, 
and at other times, another. Just at that time he was fearful that 
some fatal epidemic might sweep over the country, and, if not 
all, a very large percentage of the policy-holders of his company 
would suddenly die and the company thus become hopelessly 
insolvent. The general agent expressed a desire that the special 
should have an interview with this troublesome policy-holder. 
An interview, therefore, was arranged, and in a few hours the 
special agent and the vexatious policy-holder confronted each 
other in the private office of the general agent. After customary 
preliminaries, the policy-holder said, "What are the assets of 
your company? " " 25 millions of dollars " was the reply. " What 
amount of insurance has the company in force?" was the next 
question. "165 millions of dollars" promptly responded the 
special. "Now, sir," rejoined the policy-holder, "suppose all 
your policy-holders were to die before to-morrow morning, how 
could the company pay 165 millions of dollars, when, according 
to your statement, just made, it has only 25 millions of dollars to 



OF LIFE INSURANCE. 6? 

pay it with?" The special agent replied, "L will answer your 
questions by asking another. I will suppose you have three sons 
whose ages are five, ten and fifteen years, respectively, and that 
you have decided to make a permanent investment by which each 
of these sons shall receive, at age 21, $1,000 in cash. Your 
youngest son will be 21 in 16 years; the next older, in 11 years, 
and the oldest son in six years. Assuming that money will earn 
four per cent, compound interest, you find that $533.90 will 
amount to $1,000 in sixteen years; $649.60 will amount to $1,000 
in eleven years, and $790.30 will amount to 1,000 in six years. 
You make your investments,, accordingly, and }^ou have the best 
of reasons for believing that each of these sons will receive the 
$1,000 thus provided for at the age of 21. You know that six- 
teen years must elapse before the youngest son will be 21 ; the 
next older will not be 21 until the end of eleven years, and it will 
be six years before the oldest son will be 21. But what if all 
three of these sons were to become 21 years old to-morrow? Your 
investments would not pay the $3,000, would they? If all our 
policy-holders were to die before to-morrow morning, it would 
be a phenomenon as exceptional as if your three sons were to 
become 21 years old to-morrow. In that event our 25 millions of 
dollars would not pay the 165 millions of dollars any more than 
3^our investments would pay the $3,000. One event is as likely 
to occur as the other." 

3.— Dividends arising from the expenses having 
been less than those assumed.— If the expense element of 
a premium, which, in the example for illustration is $66.24, is not 
all needed for the purposes indicated, the balance is paid back to 
the insured, with interest earned, at the end of every policy } r ear, 
as an element of his dividend. In looking over the records of 
the companies for a series of years, it will be seen that their ex- 
penses have averaged from about $5.00 to $15,00 per annum for 
each $1,000 of insurance in force. The lower averages, with 
rare exceptions, are those of the older companies having large 
amounts of old business on their books, in which the agents have 
no renewal interest. This showing, however, is to some extent 
delusive. There are three well defined periods in the expenses of 
every company's business, — (1), the expense of procuring new 
business; (2), the expense of taking care of it after the first year 
and until the agents' renewal commissions terminate; (3), the 
expense after the renewal commission period. If our insurance 
laws would require every company to report its expenses during 
each of these periods, separately, one would probably be better 
qualified to judge more accurately of the comparative merits of 
the companies, in this respect. 

4. Dividends from Lapses and Forfeitures. A 
policy is said " to lapse" if the premium is not paid when due. 



68 THE THREE SYSTEMS 

If the Company accept the policy afterwards, upon certificate of 
health, or otherwise, the policy is then known as a " Restored 
Policy." A policy is "forfeited" when one or more of its con 
ditions of non-forfeiture are violated. These conditions vary in 
the different companies, and in the different kinds of policies 
issued by the same compan} r . The margins made, therefore, 
on lapses and forfeitures, depend not only upon the company that 
issued the policy, but also upon the kind of policy issued. A 
policy, in some companies, may lapse and not he forfeited; or, it 
may be forfeited without lapsing. In other companies a lapsed 
policy is also a forfeited policy, until restored, or a paid-up be 
issued in exchange. Every kind of a policy in every company 
will lapse, if the premium be not paid when due; but the conse- 
quences to the policy-holder, of the lapse, would be widely different 
in different companies and in different forms of polices. If a Ton- 
tine Policy, it may be restored to its original condition by 
paying the unpaid premium within 60 or 90 days, with accrued 
interest. If not restored within the specified time, it becomes a 
forfeited policy, and all the reserve and dividend accumulations 
will be finally paid to the persistent members of his Tontine class; 
if a Semi- Tontine Policy, having been in force three or 
more years, it may be restored as in the case of a full Tontine, or 
the insured may exchange his semi-Tontine, within a specified 
time, for a paid-up, forfeiting only his accumulated dividends. 
If the lapsed policy is a Life or Endowment Policy, having been 
in force two or three 3^ears, the consequences depend entirely 
upon the policy contract of the company that issued it. If in a 
a certain class of companies, it may be restored— upon giving 
certificate of health — , or exchanged for a smaller paid-up, if 
atten ded to within a limited time; or, it may be surrendered for 
cash. If in another class of companies the policy would be con- 
tinued, so long as the dividend accumulations, if any, would carry 
it, at the orignal premium rate; if in another class, the lapsed 
policy, itself, would, immediately, without notice or application, 
become a paid up for a smaller amount payable when the original 
policy would have been ; if in still another class, it wxuld be 
continued, for the full amount, so long as the reserve would carry 
it, at single payment term rate, without any action on the part of 
the insured, and so on. 

The conditions and consequences of forfeiture are as multi- 
form as are those of lapses, but more disastrous to the insured, 
depending upon the companies selected. Prompt payment of 
premium is not always a safeguard against forfeiture. Incorrect 
statements— intentional or otherwise, material or immaterial — 
made in answer to questions asked in the application for insur- 
ance, sometimes forfeit the policy, and, as this point is not gener- 
ally raised by the company until after death occurs, and the 
polic} r is presented as a death claim, vexatious and serious litiga- 



OF LIFE IXSULtANCE. 69 

tions have been the results. Suicide by the insured, whether 
sane or insane, voluntary or involuntary; excessive use of intoxi- 
cants; going beyond the prescribed limits of travel; engaging in 
certain occupations, etc., etc., have forfeited a great many poli- 
cies, and added large amounts to the surpluses of the companies. 
Some companies— not all — seem to have loaded their policy con- 
tracts "with such a multiplicity of things that the insured must, or 
must not, do, that, although he pays his premiums, promptly, he 
is nevertheless, very liable to forfeit his policy. No agent has 
authority to waive a lapse or forfeiture, so that when it occurs 
the entire reserve and dividend accumulations are in imminent 
peril. 

The lapses, alone, of fifteen companies, from 1872 to 1881, in- 
clusive, were from fifteen to eighty-seven per cent, of their entire 
new business written during that time, the average being over 
forty- three per cent. Their new business, in roue d numbers, was 
1,730 millions of dollars. The amount of lapsed insurance, 
therefore, was 744 millions of dollars! We have compared the 
lapses with the new business, but it must not be inferred from 
this that the lapses were from the new business. A very small 
percentage of them was from the new business. If the policies 
averaged $2,000, each, 372,000 policies lapsed, during the decade 
named, in only fifteen companiesW Suppose these policies to have 
all been ordinaiy Life policies, issued at an average age of 30, 
and to have been in force an average of four years before lapsing, 
the reserve at time of lapse would have been, according to the 
Actuaries' Table of Mortality and four per cent, interest, 
$29,060,640! Some of these policies were doubtless restored; 
for others paid-ups were probably issued, and others were sur- 
rendered for very meagre cash values ; but the enormous sum of 
more than twenty-nine millions of dollars was in peril! As 
these figures do not include the lapses of the Massachusetts' 
and other non-forfeitable companies, something had to be done, 
and that too in a limited time, by the policy-holders, to save any 
portion of these reserves. 

5. Dividends from Cash Surrender Values.— The 

expression,. " Cash surrender value," means, practically, this: 
If a company were to offer $500 in cash, for a policy, that 
would be the cash surrender value of that policy in that company. 
In another company it might be $800, or even $1,000! The cash 
surrender values of policies issued by Massachusetts Companies 
since January 1, 1881, are regulated by law; but, with this single 
exception, the cash surrender value of a policy is whatever the 
company that issued it offers for it. It is sometimes stipulated in 
the policy, but is generally left an open question until applied for 
by the policy-holder. The basis of cash surrender values, in the 
Massachusetts companies, is the <( Insurance Values"; but, in all 
other American Companies, it is the reserve values. 



70 THE THREE SYSTEMS 

A policy-holder in a certain company asked for the cash sur- 
render value of his policy. His reserve and surplus amounted to 
$155.99. The company offered him $26.38! 

Another gentleman who was insured in another company, 
asked for the cash surrender value of his policy, and was offered 
$1,876.52. His reserve and surplus amounted to $5,400! 

The amount paid by the 29 companies doing business in the 
State of New York, for the year ending Dec. 31, 1884, for lapsed 
and surrendered policies, was $9,503,530. Assuming that they 
paid an average of one-quarter of the reserves, the whole reserves 
amounted to $38,014,120 ! If the policies surrendered were all 
ordinary Life Policies, issued at an average age of 35, and had 
been in force an average of four years, their cash surrender value, 
according to the Massachusetts standard, was $23,948,896 — sixty- 
three per cent, of the reserves. The difference between what 
they paid and what they might have paid — according to the Mas- 
sachusetts law — without impairing their vitality, was $14,445,366. 
This last amount, therefore, was the net profits in cash surrender 
values, for one year, of only 29 of the 50 regular Life Companies 
doing business in America ! 

The amount of cash paid for surrendered policies from 1875 
to 1884, inclusive, — 10 } r ears — , by the companies reporting to the 
Massachusetts Insurance Department, was $92,099,599. Assum- 
ing that an average of one-third of the reserves was paid, the 
entire amount of reserves was $276,298,797 ! Assuming, further, 
that the policies were all Ordinary Life Policies, and issued at an 
average age of 35, and had been in force an average of four 
years, their cash surrender value, by the Massachusetts' Stand- 
ard, was $174,068,242 ! These companies could have paid this 
last amount without impairing their vitality. Subtract what was 
paid, ($92,099,599.), from what might have safely been paid? 
($174,068,242.), and we have $81,968,613, as the net profits, in 
one decade, in cash surrender values, by considerably less than 
the whole number of Life Companies doing business in this 
country at that time. Had these policies been on the 10 year 
Life Plan, instead of on the Ordinary Life, as assumed, the net 
profits would have been more than 162 millions of dollars ! ! 

6. Dividends arising* from changes. It sometimes 
occurs that a policy-holder, after having been insured a few 
years, desires to change his policy for one of another kind. It 
may be an Ordinary Life Policy and he prefers an Endowment 
or one upon which all the premiums may be paid in ten, fifteen, 
or twenty years ; or, he may wish to reduce the amount of his 
present policy. In most companies any such change is attended 
with more or less loss to the insured, and a corresponding profit 
to the company. 



OF LIFE INSURANCE, 71 



CHAPTER VII. 



CLASSIFICATION OF THE LEVEL. PREMIUM 
COMPANIES. 

Class A.— The Massachusetts Non-Forfeiture Law of 1880. 
— Letters and Answers — Examples Illustrating the 
Law. 

The companies doing business under The Level Premium 
System may be properly grouped into the followiDg classes : 

CLASS A. 

This class includes all the Life Companies chartered by and 
doing business under the authority and supervision of the com- 
monwealth of Massachusetts. They are distinguished from all 
other companies doing business in America because of ''An 
Act limiting- the Forfeiture of Policies in Life Insu- 
rance Companies," approved April 23, 1880, taking effect on 
the fifth day of March, 1881, in compliance with which all their 
policy contracts are drawn. As this law involves a new principle 
in Paid-up policies and cash surrender values, it is given in full 
as follows : 

Public Statutes, Chap. 119, Sections 161-166. 

Sect. 161. No Policy of Life or Endowment Assurance issued 
after the thirty -first day of December, in the year eighteen hun- 
dred and eighty by a domestic company shall become forfeited or 
void for non-payment of premium after two full annual pre- 
miums have been paid thereon, in cash or note, or both ; but up- 
on default in a subsequent premium payment such policy shall 
become subject to the conditions expressed in ihe lour following 
sections, any stipulation or condition of forfeiture contained in 
the policy or elsewhere to the contrary notwithstanding ; and any 
waiver by the assured of the provisions of this and the four fol- 
lowing sections shall be void ; but the provisions of this section 
and of said sections shall not prevent the performance of any 
stipulation or condition in any policy issued before the fifth day 
of March, in the year eighteen hundred and eighty-one. 

Sect. 162. In case of default in the payment of a third or of 
any subsequent annual premium on any such policy, then, with- 
out further negotiation or stipulation, such policy shall be bind- 
ing upon the company for an amount of paid-up insurance 
which the then net value of the policy, less any indebtedness of 



72 THE THREE SYSTEMS 

the assured to the company and a surrender charge as provided 
in the following section, will purchase as a net single premium 
for Life or Endowment Assurance maturing or terminating at the 
same time and in the same manner as provided in the original 
policy contract ; that is to say, no condition of the policy con- 
tract other than for the payment of premiums shall be affected 
by the provisions of sections one hundred and sixty one to one 
hundred and sixty-five inclusive ; nor shall any change be made 
in the terms of said contract on account of default in premium 
payment, after two full annual premiums have been paid as pro- 
vided in the preceding section, except as herein set forth. The 
net value of the policy, including all dividend additions declared 
thereon at the date of said default, shall be ascertained according 
to the "combined experience," or " Actuaries' " rate of Mo? 
tality, with interest at four per cent, per annum ; and from such 
value shall be deducted any indebtedness of the insured to the 
company or notes held by the company against the insured, and 
a surrender charge to be determined as provided in the following 
section. 

Sect. 163. Said surrender charge shall be determined as fol- 
lows : Assuming the rate of mortality and interest mentioned in 
the preceding section, the present value of all the normal, future, 
yearly costs of insurance which by its terms said policy is ex- 
posed to pay in case of its continuance shall be calculated, and 
eight per cent, of this sum shall be the legal surrender charge. 

*Sect. 164. When after the payment of two annual premiums 
as provided in section one hundred and sixty-one the insurable 
interest in the life of the insured has terminated, the net value of 
the policy, subject to the conditions named in section one hun- 
dred and sixty-two, shall be a surrender value payable in cash ; 
and upon the termination of such insurable interest the holder of 
a policy upon which by its terms no further premiums are paya- 
ble may upon any anniversary thereof claim and recover in cash 
from the company a surrender value computed as aforesaid ; but 
upon policies of prudential or industrial insurance, on which the 
premiums are five cents per week and upwards, but not exceeding 
fifty cents, the surrender value shall in all cases be payable in 
cash. 

Sect. 165. The insurable interest named in the- preceding sec- 
tion shall be construed to have terminated when the insured has 
no minor or dependent child ; and his wife, if he has one, and 
any living beneficiary or beneficiaries named in the policy, shall 
join in the application for surrender thereof. 

Sect. 166 The provisions of the seven preceding sections 
shall not apply to foreign life insurance companies. 

As there have been many contradictory statements made with 
reference to a policy-holder's legal claim, under this law, for cash 
surrender values, a communication was addressed to the Hon. 
Eliztjr Wright with reference to it. The communication and 
his answer are as follows: 

"Chicago, 111., Aug. 24, 1885. 
Hon. Eliztjr Wright, 

Boston, Mass. 
Dear Sir. — Referring to the Non- Forfeiting Law of Massa- 
chusetts, 1880, Public Statutes, Chap. 119 Sects. 161-166, inclu- 
sive, of which you are the recognized author, will you please state 

* See Note I, Addenda, 



OF LIFE INSURANCE. 73 

under what form of policy, if any; or, under what conditions a 
policy-holder can not claim, the cash surrender value of a policy 
issued under this law, after two or more full annual premiums 
shall have been paid, in cash, and no conditions of non-forfeiture 
named in the policy having been violated 

Very truly, 

Merven Tabor, 

State Actuary." 



" Boston, Aug, 26, 1885. 
Mervin Tabor, Esq., 

Chicago, 111. 

Bear Sir:— I was not the author of that particular feature of 
the Massachusetts law about which you inquire. Undoubtedly, 
whoever was the author, he meant to prevent the payment of any 
surrender value, in cash, whenever "a minor or dependent 
child " existed who could be benefited by the policy, and to limit 
that benefit to further insurance. As if the adult beneficiary, if 
one should exist, and the insured father himself, were not better 
protectors of that child than the state or the courts could pro- 
vide! That feature, in my judgment, is a little worse than worth- 
less, as too many laws are, and it is practically inoperative, be- 
cause it can apply only to a policy whenever the holder has neg- 
lected to have the cash surrender value for each year of its term, 
subsequent to the second, endorsed upon it. This endorsement is 
always made, I believe, by the company at issue, when requested, 
and I don't suppose the law means to preclude the company from 
performing any positive promise of cash. 

Yours truly, 

Elizur Wright." 

After receiving Mr. Wright's letter, it was thought advisable 
to communicate with the companies, themselves, and accordingly 
the following communication was addressed to the President of 
each of the Massachusetts companies under date of Sept. 8th, 

1885: 

Dear Sir. — Inquiries are being made at this office with refer- 
ence to the conditions requisite for obtaining the cash surrender 
value of a policy under Chap. 119, Sect's 161-166, Public Statutes 
of Mass. There seems to exist a wide difference of opinion. 
Some claim that whenever a policy-holder is entitled to a paid-up 
by operation of the law, he is also entitled to the cash surrender 
value, instead, if desired ; while others assert that no cash sur- 
render values can be paid when the insured has a minor or de- 
pendent child. Earnestly desiring to not misrepresent you, and, 
after consultation with the Auditor of Pub. Accounts, who is Ex- 
Officio Supt. of the Insurance Department of this State, it has 
been thought best to address this communication asking your in- 
terpretation of the law, and your practice, bearing on the point 
under discussion. If it be your practice to extend cash surren- 
der values beyond what, in your opinion, the law demands, to 
certain forms of policy contract, please make the distinction very 
plain between the cash surrender values secured by the law, and 
those voluntarily offered by the company's indorsement of the 
same. Very respectfully, 

Mervin Tabor, 

State Actuary. 



74 THE THREE -SYSTEM 8 

111 reply, the following communications have been received : 

From the New England Mutual Life 
Insurance Company. 

"Boston, Sept. 12, 1885. 
Mervin Tabor, Esq., 

185 Dearborn St., Chicago, 111. 
Dear Sir.— Your favor of the 8th inst. is received. The policy 
of this company in the matter of the payment of cash surrender 
values of policies under the n on forfeiture law of 1880 is fully 
shown in the inclosed circular. Under this law, after two full 
payments of premium the insured is entitled to paid-up insu- 
rance without further negotiation or stipulation, or at his option 
may in all cases that come under the provisions of the circular 
receive the cash value of his policy. The law of 1880 is subject 
to interpretation by the courts, but until the matter has been ad- 
versely decided upon, we shall abide by and pay cash values as 
stated in the circular.' Very truly, 

(Signed) Benj. F. Stevens, 

President. 

The following is a copj^ of the circular referred to by President 
Stevens : 

' ? The attention of the public is requested to the two distinc- 
tive features of the Massachusetts Non-Forfeiture Law pertaining 
to Life Insurance— by which a cash value or paid-up insurance is 
assured to each Policy. 

First. Every Policy, upon which two or more Annual Pre- 
miums have been paid, has a cash value payable to the holder 
of the same, when application is made therefor, upon the anni- 
versary of any subsequent Premiums, provided a legal discharge 
can be given by all parties interested. A policy made for the 
benefit of the insured can be legally surrendered by himself, if 
living, or, by his administrator or executor, in case of his death. 
A Policy made for the benefit of a married woman can be surren- 
dered upon her receipt and that of her husband. If made for the 
benefit of children, it must be shown, to the satisfaction of the 
company, that the insured has no minor or dependent child. 

Second. If the cash surrender value of a Policy is not ap- 
plied for, upon the anniversary of the payment of an Annual 
Premium, as above mentioned, then such Policy, by lapse of pay- 
ment of premiums, shall become, in the words of the law, 
"without further negotiation or stipulation/'— binding for an 
amount of Paid up Insurance which is determined according to 
the 'provisions of the law. If desired, the amounts of cash sur- 
render values and Paid-up Insurance will be put upon the Policy, 
and their payment guaranteed by the company. It is believed 
that this law— which applies only to Massachusetts companies, 
and not to Foreign companies represented in the State— -is the 
nearest approach to equity yet reached by State legislation. No 
other State has, upon its Statute Book, a law compelling com- 
panies to give to the insured an equivalent for the amount of 
premiums they have paid. 

(Signed) Benj. F. Stevens, 

President 



OF LIFE INSURANCE. 75 

A letter received from Walter C. Wright/ Actuary of the New 

England Mutual Life Insurance Company, under date of Sept. 10, 
1885, written during the absence of President Stevens, closed 
with the following sentence: 

1 ' We endorse values on all policies, and we are well satisfied 
with the working of the law." 

From the State Mutual Life Assurance Co. 

" Worcester, Mass., Sept. 22d, 1885. 
Mervin Tabor, Esq., 

Actuary Insurance, Dept., Illinois. 
185 Dearborn St., Chicago, 111. 
Dear Sir. — Our interpretation of the Non-Forfeiture Law 
of this State upon the points which you inquire about is this: In 
most cases a policy-holder when his policies lapse has the option 
of deciding whether he will take the cash surrender value of the 
same, or let it stand for a paid-up Insurance value as determined 
by the law. After lapse, if there be minor or dependent children, 
the cash surrender value cannot be paid to the insured. While 
the Company is under no obligation to pay cash surrender values 
except at the anniversary of the policy after the second, it fre- 
quently does pay these values at other times when asked to do so 
by the polic} r -holder. As, in nine cases out of ten, the cash sur- 
render value is requested while the policy is still in force, fre- 
quently, therefore, the existence of minor or dependent children 
does not prevent payment. The distinction you see is this: The 
law applies only to lapsed policies, and gives the minor or de- 
pendent children a vested interest in the cash surrender value so 
that it cannot be paid to the insured. As we generally deal with 
policies that are in force we make the payment of the cash sur. 
render value to the insured whether there are minor children or 
not. I believe this covers the questions you ask. 

Yours very truly, 
(Signed) A. G. Bullock, 

President." 

From the Massachusetts Mutual Life 
Insurance Company. 

"Springfield, Mass., Sept. 11th, 1885. 
Mervin Tabor, 

Actuary, 
185 Dearborn St., Chicago, 111. 
Dear Sir.— Your favor of the 8th came duly to hand. I 
have asked our Secretary and Actuary to give me their interpre- 
tations of the sections of Chap, 119, of Mass. laws referred to by 
you. Their replies I enclose herewith, and I trust they may an- 
swer your purpose. These opinions were written independently; 
each officer being ignorant of what was written by the other, and 
so they may fairly be said to represent the company's understand- 
ing of the law. I would add that I fully concur with the views 
expressed in these letters 

Yours truly, 
.(Signed) E. W. Bond, 

President." 



?6 THE THREE SYSTEMS 

"Springfield, Mass., Sept. 11th, 1885. 
E. W. Bond, 

President: 

Bear Sir.— As requested by you, I have read Mr. Tabor's 
letter of the 8th inst., and to the questions therein, I reply as 
follows: 

" Our understanding of the Massachusetts Law of 1880, is that 
at any of the times when a cash value would be claimed, as a 
right, by an insured person who had no minor or dependent child, 
the same cash value may be asked as a favor by an insured person 
who has a minor or dependent child, and the company may law- 
fully comply with this request, if a proper surrender can be ob- 
tained from the insured and the beneficiaries. In practice, this 
company is in the habit of so complying, but it does not bind it- 
self to pay cash values in cases where the same are not required 
by the law, except that it agrees to pay the cash values on fifteen 
and twenty payment life policies (on th« all cash plan) after they 
have become fully paid-up, on full surrender of each such policy 
on the anniversary of its date. 

Very truly, 
(Signed) Oscar B. Ireland, 

Actuary." 



Springfield, Mass., Sept. 11, 1885. 
E. W. Bond, Esq., 

President: 

Bear Sir. — In response to your request that I give you my 
interpretation of the so-called Non-Forfeiture Law of 1880, I 
would say that according to my understanding of sections 161 to 
166, Chap. 119 of our Public Statutes, we cannot be compelled to 
pay the cash value fixed therein for a policy issued under the law, 
no matter whether the policy be written for the benefit of one's 
estate or for the benefit of wife, children or other persons, except 
when the insured has no minor or dependent children. When 
the insured has no minor or dependent children, he may insist 
upon such cash value, provided his wife or any other beneficiary 
mentioned in the policy, joins in the surrender to the company; 
and if the insured be in a condition to insist upon the cash value, 
he can only claim it on a second or subsequent anniversary of the 
policy. The law places no obstacle whatever in the way of the 
company's buying its policies issued under it, for cash, if they 
choose to do so, even when the insured is not in a condition to 
insist upon a cash value, provided the insured desires cash, and 
can give a clear and valid surrender of the policy by himself and 
all beneficiaries mentioned therein. 

Our practice is to buy Act of '80 policies, paying their legal 
cash value after two years, provided we can get a valid surrender 
by the insured and all beneficiaries mentioned in the policy, but 
we at all times, reserve the right to stand upon the conditions of 
the law, if any circumstance should seem to make it advisable for 
the company to do so. The values under the law under consider- 
ation, both in cash and paid up insurance, are endorsed on the 
back of our policy, and the printed matter in connection with the 
law itself, which is printed on the policy, plainly shows the rights 
of the insured and the rights of the company. 

To two classes of policies issued by us, viz: 15 and 20 payment 
life policies, on all cash plan, we attach a rider, agreeing to pay 
the legal cash value at the end of 15 or 20 years from the date of 



OF LIFE INSUEANCE. 77 

the policy, or on any anniversary thereafter; provided we can get 
a valid surrender of the policj^, regardless of whether the insured 
has minor or dependent children or not. You of course know 
that under such a policy, it might occur that the insured could 
demand the cash value of his policy at any time within the 15 or 
20 years; so that our voluntary agreement embodied in the rider 
mentioned, may be said to be a promise additional to the rights 
to which the law entitles him; and a waiver of a right which 
might exist at the end of these terms to decline to pay the cash 
value. 

I enclose a copy of the rider referred to, and also the back of 
our policy form; these show just how this matter is set forth to 
our members. 

Very respectfully yours, 
(Signed) Johx A. Hall, 

Secretary ." 



The following is a true copy of the " rider " referred to in the 
letter of Secretary Hall, for a 15-annual payment life policy. The 
rider for a 20-annual payment Life policy is the same, except 
" twenty " is inserted in place of " fifteen." 

" After the payment of fifteen annual premiums, wholly in 

cash, on this Policy No. , the cash surrender value of 

the Policy, (computed according to the method described in sec- 
tions 162, 163 and 164 of chapter 119, of the Public Statutes of 
Massachusetts) will be paid on the fifteenth or any succeeding 
anniversary of the date of its issue, upon full surrender of the 
Policy to the company by all parties in interest." 

Printed on the back of the policy to which this " rider " is 
attached, is the following: 

" Cash surrender values can only be claimed when the 
insurable interest has terminated; see sections 164 and 165 of the 
law." 



From The John Hancock Mutual Life Insurance 

Company. 



"Boston, Mass., Sept. 14, 1885. 
Mebvin Tabor, Esq., 

Chicago, 111. 
Bear Sir.— Enclosed please find form of our policy contract, 
from which you will please observe that "the cash surrender 
values secured by law and those voluntarily offered by the com- 
pany's indorsement of the same'" are identical. 

Very truly, 
(Signed) S. H. Rhodes, 

Pres't." 



On the back of the policy referred to is a table of cash, and 
paid up, values, over which is printed the following: 



78 THE THREE SYSTEMS 

" The following table shows the amount of cash that can be 
realized on this policy at end of any year, provided the insurable 
interest as expressed in the statute (see above) has ceased; also, 
the amount of paid up insurance due at death (or if an endowment 
policy at end of endowment period) in case of non-payment of 
any premium." 



From The Berkshire Life Insurance Company. 

Pittsfield, Mass., Sept. 14, 1885. 

Mr. Mervin Tabor, 

State Actuary, &c, 
185 Dearbofn St., Chicago, 111. 
Dear Sir.— In answer to your favor I would say that this 
office passes upon eachapplication for surrender of policies, and 
determines as to what is necessary to secure for the company a 
good acquittance. Our counsel does not construe the act of 1880 
as obliging the company to pay a cash surrender value if the in- 
sured has a minor or dependent child. The company has always 
endeavored to be liberal, in the construction of such laws as affect 
the interests of retiring members, but until the Act receives judi- 
cial construction by courts of competent jurisdiction, no claim as 
to its practice will be made in its behalf. 

I am very respectfully, 
(Signed) James W. Hull, 

Secretary. 

Thus we have, in the foregoing correspondence, the full bene- 
fit of the construction of the present Non-forfeiture law of 
Massachusetts, by every Life Insurance Company affected by it . 
These companies have also given us, in an open, candid and 
frank manner, their practices under the law. They have not 
dodged a single point in our letter. They are evidently living 
up to not only the letter, but also the spirit, of the law ; and, 
judging from this correspondence, we conclude that whenever a 
doubt arises as to the real meaning of the law they give their 
policy-holders the benefit of such doubt, if they can do so with- 
out involving themselves and consequently their membership 
— for they are all Mutual Companies— in legal complications that 
might possibly arise through the instrumentality of designing 
and unscrupulous parties. 

The following assumed examples sufficiently illustrate the 
benefits of the law : 

Example 1.— Amount of Policy, $10,000 ; Age of the Per- 
son Insured, 41 ; Kind of Policy, Life Kate Endowment Re- 
quiring an Annual Premium of $326. Q0 ,— less the annual cash 
dividend — , until the Insured Shall Attain the Age of 76, 
at Which Time the Policy will be Paid in Full as an En- 
dowment ; or, at Death, if it Sooner Occur. 



OF LIFE INSURANCE. 



79 



Age at issue, 41 ; Age at Maturity, 76 ; Amount, $10,000. 
Annual Premium, $826.00. 



Year. 


Cash-Surr. 


Paid-up 


Year. 


Cash-Surr. 


Paid-up 




Value. 


Insurance. 




Value. 


Insurance. 


2d 


$183.60 


$ 430 


19th 


$3,903.90 


$6,050 


3d 


363.70 


830 


20th 


4,169.90 


6.320 


4th 


549.00 


1,230 


21st 


4,442.30 


6,570 


5th 


739.50 


1,610 


22d 


4,722.00 


6,820 


6th 


934.50 


1,990 


23d 


5,009.40 


7,060 


7th 


1,134.30 


2,350 


24th 


5,305.90 


7,310 


8th 


1,338.60 


2,710 


25th 


5,612.70 


tf,550 


9th 


1,547.40 


3,050 


26th 


5,931.50 


7,780 


10th 


1,761.10 


3,390 


27th 


6,264.20 


8,020 


Uth 


1,979.40 


3,720 


28th 


6,614.00 


8,250 


12th 


2,202.30 


4,040 


29th 


6.984.30 


8,490 


13th 


2,430.30 


4,350 


30th 


7,379.70 


8,720 


14th 


2,662.30 


4,650 


31st 


-7,805.80 


8,960 


15th 


2,899.80 


4,950 


32d 


8.270.10 


9,210 


16th 


3,142.30 


5,240 


33d 


8,781.80 


9,460 


17th 


3,390.70 


5,520 


34th 


9,353.10 


9,730 


18th 


3,644.20 


5,790 i 


35th 


10,000.00 


10,000 



Note 1. — In 1883 this company ceased issuing policies payable 
only at death, or what are commonly called Whole Life Poli- 
cies ; and, instead, commenced issuing- policies payable at death, 
or after a fixed number of years in case it should not occur 
sooner, charging precisely the same annual premiums, and called 
them Life -Rate Endowments. The reserve law of the State 
requires a larger reserve accumulation on this kind of a policy, 
and consequently, the cash surrender and paid-up values, from 
year to year, are considerably larger than those of a whole life 
policy issued at the same age and for the same amount of insur- 
ance, at the expense however of less dividends, in the same com- 
pany. 

Note 2. — In the cash surrender, and the paid-up insurance 
values as given above, it is assumed that all the cash dividends 
have been used in the reduction of premiums. The paid-up 
values are what the law guarantees absolutely. The cash values 
are guaranteed by law under certain conditions fully explained 
elsewhere. 



Example 2.— Amount of Policy, $10,000 ; Age of the 
Person InsuRED, 35 ; Kind of Policy, 20-Payment Life— 
Special Contract— TtEQumiNG the Payment of only 20 Annual 
Premiums of $342, each. 



80 



THE THREE SYSTEMS 



Age at issue, 35 ; Amount of Policy, $10,000 ; Policy payable at 

death. 



Year. 


Paid-up 


Cash Surr. 


| 1 EAR. 


Paid-up 


Cash Surr. 




Insurance. 


Value. 




Insurance. 


Value. 


1st 


$0,000 


$0,000.00 


1 21st 


$10,000 


$5,383.40 


2d 


663 


236.20 


! 22d 


10,000 


5,502.80 


3d 


1,192 


434 00 


23d 


10,000 


5,623.30 


4th 


1,717 


639.60 


24th 


10,000 


5,744.70 


5th 


2,240 


853.60 


25th 


10,000 


5,866.70 


6th 


2,760 


1,076.30 


26th 


10,000 


5,989.20 


7th 


3,276 


1,308.00 


27th 


10,000 


6,111.80 


8th 


3,790 


1,549.20 


28th 


10,000 


6,234.10 


9th 


4,300 


1,799.90 


29th 


10,000 


6,356.30 


10th 


4,806 


2,060.10 


30th 


10,000 


6,477.90 


11th 


5,309 


2,329.90 


31st 


10 000 


6,598.60 


12th 


5,806 


2,609.30 


32d 


10,000 


6,718.30 


13th 


6,301 


2,898.80 


! 33d 


10.000 


6,836.70 


14th 


6,794 


3,199.20 


j 34th 


10,000 


6,953.80 


15th 


7,285 


3,510 70 


| 35th 


10,000 


7,069.40 


16th 


7,775 


3,834.30 


36th 


10,000 


7,183.30 


17th 


8,267 


4.170.50 


37th 


10,000 


7,295.50 


18th 


8,761 


4,520.40 


38th 


10 000 


7,405.70 


19th 


9,258 


4,884.60 


39 th 


10,000 


7,513.90 


20th 


10,000 


5,264.90 


40th 


10,000 


7,620.00 



It will be observed that, at the end of the 20th year the policy 
is a paid-up for its full face value. No more payments are re- 
quired. Assuming that the insured has lived through the twenty 
years and paid his premiums according to contract, in cash, he 
has paid the company 20 times $342, amounting to $6,840, less 
the dividends. Had he stopped paying premiums at any time 
after the first two years he would have had, then and there, 
without any act on his part, paid-up insurance for the amount 
indicated in the above table opposite the year in which payment 
of premiums was discontinued. The law of Massachusetts 
gives him that, and the company endorses it on every policy ! 
There are no exceptions ; the law is absolute and unconditional 
with reference to paid-ups, in all the Massachusetts companies, 
after the first two years! With reference to cash values the law 
is not so absolute in its requirements. It compels the payment 
of no cash values except when the insured has no minor or de- 
pendent child. If the insured have no minor or dependent child, 
and his wife, if he have one, and any living beneficiary or bene- 
ficiaries named'vn the policy shall join in the application for the 
cash surrender value, after the payment of two annual premiums, 
then the law compels the payment of the cash surrender value. 
But the Massachusetts companies, generally, are more liberal in 
this respect than the law is. In the above policy, for example, 
the company attaches what it terms a " rider, ,} by which it guar- 



OF LIFE INSURANCE. 



81 



antees to pay the cash surrender value on the twentieth or any 
succeeding anniversary of the date of its issue, upon the full 
surrender of the policy to the company by all parties in interest ; 
— and, in the Secretary's letter published on a preceding page, 
he adds, with reference to 15 and 20 payment life policies, on all 
cash plan, "regardless of whether the insured, has miner or de- 
pendent children or not." This contract, therefore, is called a 
*' special contract" because the company gives to the insured a 
more liberal contract with reference to cash surrender values than 
the law requires. 

In computing the above values — Paid-up Insurance, and cash 
surrender — it is assumed that the cash dividends were applied, 
from year to year, during the premium paying period, 20 years, 
in payment of the premiums. If premiums were paid in full, 
leaving the dividends to accumulate in the hands of the com- 
pany, at compound interest, the paid-up and cash surrender 
values would be very much larger than those named in the above 
table. The fact should not be overlooked that, on this kind of a 
policy the cash dividends continue through life, although no pay- 
ment of premiums is required after the first 20 years. These will 
be a constant source of income during the balance of life. The 
amount of this annual income will depend, of course, principally, 
upon the rate of interest realized on the reserves. 



Example 3. — Amount of Policy $10,000 ; Age of the 
Person Insured, 39 ; Kind of Policy, 36 -Year Endowmemt 
requiring Thirty-sex Annual Payments of $324.60, each. 



Age at Issue, 39; Amount of Policy, $10,000; Age of Ma- 
turity, 75. 



Year. 


Paid-up 


Cash surr. 


Year. 


# Paid-up 


Cash Surr. 




Insurance. 


Value. 




Insurance 


Value. 


1st 


$000 


$000.00 


19th 


$5,953 


$3,706.80 


2d 


405 


165.50 


20th 


6,211 


3,963.20 


3d 


793 


332.00 


21st 


6,464 


4,226.30 


4th 


1,477 


505.40 


22d 


6,712 


4,496.50 


5th 


1,554 


684.00 


23d 


6,954 


4,774.20 


6th 


1,922 


867.50 


24th 


7,192 


5,060.40 


7th 


2,284 


1,057.00 


25th 


7,426 


5,355.60 


8th 


2,635 


1,250.50 


26th 


7,657 


5,661.50 


9th 


2,978 


1,449.00 


27th 


7,885 


5,979.60 


10th 


3,312 


1,652.10 


28th 


8,112 


6,312.00 


11th 


3,637 


1,860.10 


29th 


8,338 


6,660.90 


12th 


3,953 


2,073.10 


30th 


8,565 


7,030.10 


13th 


4,261 


2,290.80 


31st 


8,793 


7,423.70 


14th 


4,562 


2,513.60 


32d 


9,023 


7,846.90 


15th 


4,854 


2,741.20 


33 d 


9,258 


8 306.30 


16th 


5,139 


2,974.40 


34th 


9,498 


8,810.40 


17th 


5,417 


3,212.70 


35th 


9,745 


9,370.30 


18th • 


5,688 


3,456.70 


36th 


10,000 


10,000.00 



82 



THE THREE SYSTEMS 



The same general principles apply to this form of policy as to 
all others issued under the Massachusetts law. 

Example 4.— Amount of Policy, $10,000; Age op the In- 
sured, 30; Kind of Policy, 10 Year Endowment requiring 
the Payment of ten Annual Premiums of $1,056.60, Each. 



Age at issue, 30; amount of policy, 10,000; age at maturity, 40. 



Year. 


Paid up 
Insurance. 


Cash surr. value. 


Year. 


Paid up 
Insurance. 


Cash surr. 
value. 


1st 

2d 

3d 

4th 

5th 


$0,000.00 
2,195.30 
3,270.00 
4,315.60 
5,332.70 


$0,000.00 
1,621.50 
2,505.20 
3,430.60 
4,400.02 


6th 
7th 
8th 
9th 
10th 


$6,321.20 
7,281.90 
8,215.00 
9,120.80 

10,000.00 


$5,416.10 
6,481.20 
7,598.20 
8,770.00 

10,000.00 



Example 4 is to illustrate the Non-Forfeiture law of Massa- 
chusetts with reference to a 10-year Endowment policy. The 
above paid up and cash surrender values are on the basis that the 
cash dividends are all used during the ten years in payment of 
premiums. If the dividends were left with the company to be 
compounded at the average rate of interest realized by the com- 
pany, these values would be much larger. The law is self-acting. 
Two annual premiums paid, in cash, and no more attention paid 
to the policy by the insured, he would henceforth be insured for 
$2,195.30 until the end of the endowment period, when, if then 
living, he would receive this amount in cash. If death occurred 
prior to the expiration of the endowment period his heirs 
would receive the $2,195.30! The cash surrender value from year 
to year is what he would be entitled to upon legal surrender of 
the policy. 

Example 5.— Amount of Policy, $10,000; Age of the Per- 
son Insured, 40; Kind of Policy, 25 Year Endowment re- 
quiring Twenty-Five Annual Payments of $404 30, Each. 

On the back of a policy of this kind, for the amount named, 
and issued on a life at age 40, one of the Massachusetts com- 
panies places the following certificate: 



"Policy No. 



" The company of .". , 

Massachusetts, hereby agrees to give, in accordance with the 
provisions of the law of 1880, Pub, Stats. Ch. 119, Sees. 159-166, 

to the within named on any 

anniversary of this policy after the end of two full years from the 



OP LIFE INSURANCE. 



83 



date thereof the cash surrender, or paid up values herein below 
stated, any indebtedness to the company on account of this 
policy being first deducted therefrom." 





Cash. 




Paid up. 






( 


Annual Premiums 






$379.10 A1 


'ter 2 1 


have been paid 
wholly in cash. 


$785.10 




636.60 


1 3 


(S 


1,281.60 




904.20 


4 




1,769.20 




1,181.14 


' 5 


( ( 


2,246.20 




1,469.40 


6 




2.713.90 




1,767.50 


7 




3,170.90 




2,076.00 


8 


i t 


3,617.10 




2,395.50 


9 




4,052.90 




2,726.80 


' 10 


i ( 


4,478.80 




3,070.60 


' 11 




4,895.50 




3,427.00 


' 12 




5,302.10 




3,798.50 


' 13 




5,701.70 




4,184.70 


4 14 


i ( 


6,092.40 




4,587.20 


' 15 




6,475.20 




5,007.50 


' 16 




6,850.80 




5,447.30 


' 17 




7,219.80 




5,908.60 


' 18' 


e I 


7,582.60 




6,393.70 


' 19 




7,939.90 




6,905.50 


1 20 


i < 


8,292.50 




7,446.70 


' 21 




8,640.20 




8,021.60 


' • 22 




8;984.30 




8,634.80 


' 23 




9,325.30 




9,291.90 


' 24 




9,663.60 




10,000.00 


1 25 




10,000.00 



Signed, 



Secretary. 



84 THE THREE SYSTEMS 



CHAPTER VIII. 



Class B.— Non-Forfeiture Law of Maine.— Example.— Non- 
Forfeiture Law of Michigan.— Examples of Policies Is- 
sued by Different Companies in Class B. 

B. CLASS. 

Into this class are grouped all Life Insurance Companies doing 
business on the Level Premium plan, that are operating under the 
Non-forfeiture laws of their respective States— except Massachu- 
setts—and also those companies, their States having no Non- 
forfeiture laws, that have adopted, voluntarily, Non-forfeiting 
forms of policies by which the reserves of their policy-holders 
are either partially or wholly protected after two or three annual 
premiums have been paid. 

The Non-forfeiture Law of Maine.— Only one company 
is doing business under this law, and, in several respects, the 
compa^ is issuing more liberal forms of policies than the law 
requires. The law is as follows: 

" Section I. — Every policy of life Insurance issued on and 
after the first day of April, in the year of our Lord one thousand 
eight hundred and seventy-seven, by any company chartered by 
the authority of this State, which may be forfeited for non-pay- 
ment of premiums, including all notes given for premiums or in- 
terest thereon after it shall have been in force three full years, 
and which shall not contain provision for a surrender value at 
least equivalent to the value arising under the terms of this Act, 
shall, nevertheless, be continued in force to an extent and for a 
period of time to be determined as follows, to wit: The net value 
of the policy, when the premium becomes due and is not paid, 
shall be ascertained according to the combined experience or 
actuaries' rate of mortality, with interest at four per centum per 
annum. After deducting from three-fourths of such net value 
any indebtedness to the Company, or notes held by the Company 
against the insured (which notes, if given for premium, shall 
then be cancelled), what remains shall be considered as a net 
single premium of temporary insurance ; and the term for which 
it will insure shall be determined according to the age of the 
party at the time of the lapse of the policy, and the assumptions 
of mortality and interest aforesaid; but if the policy shall be an 
endowment payable at a certain time, or at death if it shall pre- 
viously occur, then, if what remains as aforesaid shall exceed the 
net single premium of temporary insurance for the balance of the 
endowment term for the full amount of the policy, such excess 



OF LIFE INSURANCE. 85 

shall be considered as a net single premium or simple endowment, 
payable only at the same time as the original endowment, and in 
case the life insured survives to such time; and the amount thus 
payable by the Company shall be determined according to the 
age of the party at the time of the lapse of the policy, and the 
assumptions of morality and interest aforesaid." 

"Sect. 2, — If the death of the life insured occur within the 
term of temporary insurance covered by the value of the policy 
as determined in the previous section, and if no condition of the 
insurance other than the payment of premium has been violated 
by the insured, the Company shall be bound to pay the amount 
of the policy the same as if there had been no lapse of premium, 
anything in the policy to the contrary notwithstanding \ provided, 
however, that notice of the claim, and proof of the death, shall 
be submitted to the Company, in the same manner as provided by 
the terms of the policy, within ninety days after the decease; 
and, provided, that the Company shall have the right to deduct 
from the amount insured in the policy the amount, compounded 
at seven per centum per annum, of all the premiums that had 
been forborne at the time of the death, including the whole of the 
year's premium in which the death occurs." 

Additional Benefits Given by the Company. — Instead of 
deducting one-fourth of said net value to obtain said net single 
premium, there shall be deducted the present value of the differ- 
ences between the future premiums named in the policy and the 
future net premiums on said policy ascertained according to the 
rates of mortality and interest aforesaid; which present value, in 
no event, however, shall exceed one-fourth of said net value: 

And the ordinary life premium, not, however, to exceed five 
in number at age of issue, viz., $22.70 at age 30 for each $1,000 
insured, shall be deducted from the policy, if it becomes a claim, 
as provided in the law, instead of the larger premium named 
in the policy: 

The proof of death may be filed in all cases within one year 
after such death, instead of within ninety days as provided in the 
law: 

So that, if no condition of the policy other than the payment 
of premiums is violated, the results named in the statement on 
the third page hereof — reference being made to the policy — ■ 
shall be secured to the beneficiary, provided all premiums paid on 
this policy have been fully paid in cash; but, if there remains 
any note or other indebtedness against this policy at the date of 
lapse, it will be deducted according to the provisions of the 
Maine Non-forfeiture law. 

Example illustrating the Maine Non- Forfeiture Law 
and the additional benefits given by the company. 

Policy, $1,000; Age of the Party Insured, 30; Kind of 
Policy, 1 Year Endowment, requiring ten annual pay- 
ments of $104.58, each. 

If the party insured were to pay, under the above policy, three 
annual premiums, and then quit paying, giving no more attention 



86 THE THREE SYSTEMS 

to the policy whatever, or to notices that might be sent him that 
his fourth payment would be due at a certain date, the three pre- 
miums paid would, notwithstanding, carry him seven years 
longer, making 10 years insurance; and, if living at the end of 
the seven years the company would pay him $188.13 in cash! 

Four annual premiums paid would carry him six years longer, 
and give him at the end of the six y ears — if living — $280.34! 

Five annual premiums paid would carry him five years longer, 
and, if living at the end of the five years, he w T ould receive $392.63 
in cash ! 

Eight annual premiums paid would carry him two years 
longer, and, if living at the end of the two years, he would re- 
ceive $774.68 in cash. 

Nine annual premiums paid would carry him one year longer, 
and, if then living, the company w T ould pay him $890.12 in cash! 

If death were to occur, the first year after lapse, the com- 
pany would pay $975.71; if the second year, $949.72; if the third 
year, $921.91; if the fourth year year, $892.14; if the fifth year, 
$860.32— provided the policy had been in force at least three 
years before lapsing, and provided, also, that death occur within 
the period of extended insurance. 

A different age, or kind of policy, or any change whatever 
from the above would change all the results. 

The Non-Forfeiture Law of Michigan, as amended, in 

1881: 

Sec. 17. No policy of insurance on life, issued after this act 
shall take effect, by any company organized under the laws of 
this State, shall be forfeited or become void by the non-payment 
of any premium thereon, after the third, any further than as fol- 
lows: The net value of the policy when the premium becomes 
due and is not paid, shall be ascertained according to the 
" American experience Table " rate of mortality with interest at 
four per centum per annum. 

A surrender charge shall be first deducted from such net value 
on the following basis, to w T it: From policies that have paid 
three full years' premiums, forty (40) per cent.; from policies 
that have paid four full years' premiums, thirty six (36) per cent. ; 
from policies that have paid ~&Ye full years' premiums, thirty-two 
(32) per cent., and so on in like manner, decreasing the discount 
four (4) per centum for each full years' premium paid, until the 
discount is exhausted, when no surrender charge shall be made. 

After deducting the surrender charge from the net value, the 
remainder shall be considered a net single premium of whole life 
non-participating insurance and the amount it will insure shall 
be determined according to the age of the party at the time when 
the unpaid premium became due and the assumptions aforesaid 
in regard to rate of interest and table of mortality. 

In case of any indebtedness on any policy, such indebtedness 
shall be first deducted from the net value remaining, after deduct- 
ing the discount, and the remainder, if any, shall be used as the 
net single premium as aforesaid. 



OF LIFE INSURANCE. 



87 



The following table illustrates the workings of the Michigan 
Non-Forfeiture law as applied to an Ordinary Life Policy 
issued at age 40, for $10,000 insurance: 



Annual premiums, less the divi- 
dends, paid in cash. 


Secures to the insured 


A paid-up for 


3 






$641.90 


4 






906.90 


5 






1,195.30 


6 






1,506.90 


7 






1,840.90 


8 






2,194.90 


9 






2,570.60 


10 






2,961.70 


11 






.3.371.80 


12 






3,799.10 


13 






4,239.00 


14 






4,510.40 


15 






4,776.50 


16 






5,032.60 


17 






5,278.50 


18 






5,517.10 


19 






5,748.70 


20 






5,970.10 


25 






6,947.70 


30 






7,728.60 


35 






8,335.20 


40 




8,825.80 



No surrender of the policy is necessary to secure these paid- 
ups ; the original policy itself becomes a paid-up, in the event of 
lapse, without further negotiations. 

There is only one company, at present, doing business under 
The Non -Forfeiture law of Michigan. In addition to the 
Ordinary Life Policy, this company issues all the usual forms of 
policies, including Limited Payment Life, Ordinary Endowment, 
Limited Payment Endowment, Semi- Endowment, etc., etc. 

The following is an illustration of the advantages offered un- 
der the Ordinary Endowment Policy: 



Amount of policy, $10,000 ; age, 40 ; Kind of Policy, 35- 
Year Endowment, requiring thirty five annual payments 
of $312.40 EACH. 

On the back of every policy, as above described, is printed in 
full face type, the following: 

"It is hereby agreed, that on the surrender of this policy, 
duly receipted by the insured and beneficiaries, the {here is in- 
serted the name of the company) will, at the end of the third or 
any subsequent year, pay in cash the surrender value specified 
in the following table: 



Lt end 


of 3d 


year, 


< t 


4th 


i ( 


" 


5th 


a 


t ( 


6th 


tt 


C 1 


7th 


i t 


i t 


8th 


i ( 


I' 


9th 


t ' 


li 


10th 


( <. 


11 


11th 


K 


I ( 


12 th 


<< 


a 


13 th 


i ' 


<; 


14th 


tt 


c i 


15th 


( i 


i ' 


16th 


i ( 


tt 


17th 


I < 


a 


18th 


I' 


i ( 


19th 


I < 


i ( 


20th 


a 


i < 


21st 


a 


i ( 


22d 


a 


a 


23d 


a 


i ( 


24th 


a 


<i 


25th 


a 


i < 


26th 


( c 


a 


27th 


a 


i < 


28th 


i < 


( ( 


29th 


i ( 


i < 


30th 


(< 


<; 


31st 


tt 


c t 


32d 


a 


i t 


33d 


< t 


< i 


34th 


a 


" 


35th 


a 



THE THREE SYSTEMS 



at least ....$ 364.90 

503.20 

649.90 

805.40 

- 969.50 

1,142.50 

1,324.10 

1,514.60 

1.713.50 

1,921.10 

2,137.00 

2,361.70 

2,594.70 

2,836.10 

3,085.70 

3,344.20 

3,610.60 

3,886.00 

4,170.80 

4,464.40 

4,767.90 

5,081.70 

5,407.20 

5,746.40 

6,100.60 

6,470.90 

6,861.70 

7,276.70 

7,721.80 

8,205.70 

8,736.90 

9,328.70 

10,000.00. 



<< 



There is a very remarkable definiteness to the above contract. 
"On the surrender of this policy, duly receipted by 
the insured and beneficiaries "—an y time — not within six 
or twelve months, but wlienever the policy is duly surrendered 
and receipted, the cash will be paid according to the table above. 
The reader will also notice, in the table the expression, " at 
least." The cash values named are those agreed to be paid when 
all dividends have been used in payment of premiums. If divi- 
dends are left to accumulate, the cash surrender values are larger 
than the amounts named in the table. 

The following assumed examples will sufficiently illustrate the 
character of policies issued by one of the most prominent com- 
panies of class B: 



Example 1. — Amount of Policy, ^10,000 ; Age of the In- 
sured, 36 ; Kind of policy, Ordinary Life, requiring the 
annual payment of $208 . 60, during life. 



OF LIFE INSURANCE. 



89 



Age at issue, 36/ Amount of policy, $10,000; 
Annual premium, $268.60. 





Extended Insur- 








End of Pol. 


ance. 


Age at nearest 


Paid-up Insur- 


Reserve Accumu- 






birth-day. 


ance. 












Years. 


Days. 








1st 


00 


00 


37 


$ 000 


$ 112.57 


2d 


2 


54 ' 


38 


550 


229.27 


3d 


3 


96 


39 


830 


350.08 


4th 


4 


143 


40 


1,100 


475.21 


5th 


5 


187 


41 


1,380 


604.63 


6th 


6 


217 


42 


1,650 


738.56 


7th 


7 


224 


43 


1,920 


877.00 


8th 


8 


198 


44 


2,190 


1,020.06 


9 th 


9 


134 


45 


2,460 


1,167.65 


101k 


10 


32 


46 


2,720 


1,319.89 


15th 


12 


75 


51 


3,980 


2,145.53 


20th 


12 


187 


56 


5.110 


3,059.30 


25th 


11 


277 


61 


6,080 


4,028.29 


30th 


10 


174 


m 


6,900 


5,009.32 



Note 1. — The above "extended insurance" and "paid up in- 
surance values " are conditioned on the payment of every year's 
premium in cash less the dividend. If the premium be paid in full 
every year, leaving the annual cash dividends to accumulate at 
compound interest in the hands of the company; or, if the cash 
dividend be used in purchasing additional insurance, in either 
case the above values will be very materially increased. On the 
other hand, if the insured do not pay the premiums "wholly in 
cash, but partly by note, then these values will be less than those 
stated in the above table. 

Note 2.— The company that issues the above form of policy 
says in its annual report, 1885, page 15, "The failure to pay a 
premium on time does not interrupt the insurance, which will be 
continued in full force as long as the value of the policy will 
pay for." The " value of the policy" referred to is found in the 
column of Reserve Accumulations, above. At the end of the 
second year it is $229.27, and, if at that time the insured does not 
pay his third annual premium, the insurance for $10,000 — full 
face of policy — goes right along and will continue to do so for 
two years and 54 days ! If, within a reasonable length of time 
he concludes that he rather have a paid-up policy for $550 of 
insurance, extending over the whole of life, payable at any time 
to his estate or some beneficiary named, at death, whenever it 
may occur, such a paid-up policy will be issued upon legal 
surrender of the original policy. It will be observed that the 
insured receives the extended insurance, without further 



90 



THE THREE SYSTEMS 



negotiations or stipulations ; but, if the corresponding paid- 
up is desired, instead, it must be applied for, within three months 
after the lapse of policy. 

Note 3. — It is this company's practice to loan to its policy 
holders, if desired, at six per cent, per annum, one-half of their 
accumulated reserves. In the above example, the loan would 
be one-half the amount of the reserve accumulations — including 
the amount of notes, if an}?-, held by it against the insured — as 
shown in the right hand column in the above table. For ex- 
ample, at the end of the eighth year, the company would loan 
him $510.03; at the end of the twentieth year, $1,529.65, and simi- 
larly with reference to any other year. 

Example 2. — Amount of Policy, $10,000 ; Age of the In- 
sured, 30; Kind of Policy, 20- Year Endowment requiring 
Twenty Annual Payments of $484.80, each. 



Age at issue, 30; amount of policy, $10,000; 
Endowment, maturing at 50. 



End of 


Extended Insurance. 


Cash payable at 
end of Endow- 
ment if the in- 




Paid-up 


Reserve 


year. 






< 


Insurance. 


Accumulations. 




Years. 


Days. 


sured lives. 






1st 


00 


000 


$000 


31 


$000 


$310.83 


2d 


7 


• 147 


000 


32 


1,080 


636.05 


3d 


11 


266 


000 


33 


1,620 


976.30 


4th 


16 


000 


30 


34 


2,140 


1,332.26 


5th 


15 


000 


800 


35 


2,660 


1,704.77 


6th 


14 


000 


1,580 


36 


3,170 


2,094.72 


7th 


13 


000 


2,320 


37 


3,680 


2,502.84 


8th 


12 


000 


3,030 


38 


4,180 


2,930.15 


9th 


11 


000 


3,720 


39 


4,670 


3,377.53 


10th 


10 


000 


4,280 


40 


5,150 


3,846.11 


11th 


9 


000 


5,000 


41 


5,620 


4,336.96 


12th 


8 


000 


5,590 


42 


6,090 


4,851.39 


13th 


7 


000 


6,160 


43 


6,540 


5,390.67 


14th 


6 


000 


6,710 


44 


6,990 


5,956.25 


15th 


5 


000 


7,230 


45 


7,430 


6,549.61 


16th 


4 


000 


7,820 


46 


7,950 


7,172.51 


17th 


3 


000 


8,380 


47 


8,460 


7,826.76 


18th 


2 


000 


8,940 


48 


8,970 


8,514.48 


19th 


1 


000 


. 9,470 


49 


9,490 


9,238.00 


20th 





000 


10,000 


50 


10,000 


10,000.00 



Note 1. — The above example, being an endowment policy, 
differs somewhat from a life policy in the extended insurance. 
For example, at the end of the sixth year, if the premium were 
not paid, the value of the policy — right hand column — is $2,094.72. 
This value if all applied in the purchase of extended insurance 



OF LIFE INSURANCE. 91 

would carry the original policy far beyond the limits of the en- 
dowment, so that enough of it is applied to carry the policy to 
the end of the endowment period — 14 years longer — and the 
balance is used in the purchase of what is called "pure" endow- 
ment payable at the end of the twenty years, in cash. If the 
party, therefore, insured as above, lets his policy lapse at the 
end of the sixth year, the value of the policy carries it through the 
term, and, if then living to receive it, he is paid $1,580, in cash! 
If, within three months after his policy lapses, he prefers a paid- 
up policy instead of the extended insurance and the $1,580 in 
cash, as explained, he can surrender the original policy, and the 
company will issue a paid-up for $3,170, payable at death or at 
the end of the original endowment period when he shall attain 
the age of 50. 

The same general remarks made with reference to the other 
example are applicable to this. This Company issues all the 
usual forms of policies, life, limited-payment life, endowment, 
limited-payment endowment, etc., etc., and they are all nonfor- 
feitable after two years, and incontestable except for fraud after 
three years. 

Renewable Term Insurance.— Only one company issues 
this kind of policy. This form of policy was first introduced in 
1868. It is copyrighted. First policies under this system are 
issued only to sound and healthy persons between the ages of 
16 and 60 years, and for a term of ten years from date of 
issue. In case a renewal of the term is desired, the policy must 
be returned to the officers of the company for this purpose " be- 
fore its expiration, when a new or renewal policy of similar form 
will be issued in exchange, dated at the expiration of the previous 
one. All renewable term policies will be written for a term of 
ten years, except that when the term expires at and after the age 
of seventy, the policy then issued will be written for the re- 
mainder of life and not be subject to any further change. The 
entire surplus under each policy will be accumulated in the hands 
of the company, and applied toward maintaining the premiums 
at the rate originally charged. If, at the expiration of any term, 
the surplus arising under each policy, together with the original 
rate, shall not be sufficient to continue the insurance for the full 
amount, it shall be optional with the insured to pay the rate re- 
quired for the age then attained, after such surplus has been 
applied, or to reduce the amount of the insurance and continue 
previous payments. No medical examination of the insured will 
be required in case of renewal, at the end of any term, or in 
exchange for another form of policy for the same amount of in- 
surance. At the end of three years a paid-up will be given, if 
desired, or two-thirds of the net value of the policy and accu- 
mulated surplus will be paid in cash; provided, in either case, 
the policy be surrendered to the company, and the paid-up policy 



92 



THE THREE SYSTEMS 



or cash payment applied for within twelve months from its date 
of expiration. If the insured shall have attained the age of 
seventy, the entire accumulations will be paid in cash, or a 
paid-up policy issued as above provided. No policy will be 
issued on this plan, calling for any payment (annual, semi-annual 
or quarterly) of less than fifteen dollars. Female risks are taken 
under this form of policy — for $5 per each $1,000 of insurance, 
extra, under the age of 55. 

It is claimed by the Company that all contracts, under 
this form of insurance, for the first 10 years, owlng to 
the dividend accumulation on the same, have been contin- 
ued during the second ten years at the same rate of 

PREMIUMS, NOTWITHSTANDING INCREASE OF AGE.M The following 

are the 

Rates to insure $1,000. 



Age. 


Annual premium. 


Annual premium. 


Age. 


16 to 20 


$11.09 


$21.91 


41 


21 


11.37 


22.86 


42 


22 


11.66 


23.88 


43 


23 


11.97 


24.97 


44 


24 


12.29 


26.14 


45 


25 


12.64 


27.39 


46 


26 


13.00 


28.71 


47 


27 


13.38 


30.10 


48 


28 


13.79 


31.59 


49 


29 


. 14.21 


33.17 


50 


30 


14.67 


34.84 


51 


31 


15.14 


36.62 


52 


32 


15.65 


38.51 


53 


33 


16.19 


40.52 


54 


34 


16.75 


42.66 


55 


35 


17.36 


44.94 


56 


36 


18.00 


47.36 


57 


37 


18.68 


49.94 


58 


38 


19.41 


52.70 


59 


39 


20.19 


55.64 


60 


40 


21.02 







Note. — A person insuring on the above plan, at age 40, for 
Instance, would pay on a policy of $10,000, $210.20 each year 
during the first ten years. If he were to die during the time, the 
company would pay to the beneficiary named in the policy, 
$10,000 in cash. If the insured, toward the close of the first ten 
years, should decide to renew the contract, he must notify the 
company to that effect, returning to its officers the original policy 
before the expiration of the term. The company would then act 
upon his application, as fully stated above. 



OF LIFE INSURANCE. 



93 



The following table shows the results of Renewable Term 
Policies for $1,000, issued at different ages in the year 1872, these 
results being calculated for 1882, or at the expiration of the tenth 
policy year. These figures are not to be considered as a guaran- 
tee for the future, but simply an illustration of the experience of 
the Company under this plan of insurance. 

The premiums on policies on this plan, issued in the years 
1868, 1869, 1870, 1871 and 1872, have not been increased for the 
second term of ten years. 



Age. 


Premiums 


Total 


Two-Thirds 


Paid-up 


Age. 


paid. 


Accumulations. 


Accumulations. 


Value. 




20 


$110.90 


$35.21 


$23.47 


$115.00 


20 


25 


126.40 


45.86 


30.57 


135.00 


25 


30 


146.70 


59.85 


39.90 


157.00 


30 


35 


173.60 


78.86 


52.57 


184.00 


35 


40 


210.20 


101.36 


67.57 


210.00 


40 


45 


261.40 


124.29 


82 86 


231.00 


45 


50 


331.70 


148.20 


98 80 


247 00 


50 


55 


426.60 


171.90 


114.60 


260.00 


55 


60 


556.40 


190.47 


126.98 


265.00 


60 



94 THE THREE SYSTEMS 



CHAPTER IX. 



Class C. — The New York Insurance Law.— Three Examples 
of Matured Endowments. — A Kemarkable Life Insur- 
ance Law. — Example in Illustration. — Assumed Exam- 
ple of a Tontine Policy. — Actual Examples of Matured 
Tontine Policies. 

C CLASS. 

This class embraces all companies doing business under the 
Level Premium System, whose policies, in the main, are not Non- 
Forfeitabie; that is to say, their policy-holders have to do some- 
thing } within A specified time, if payment of premiums be 
discontinued after the first two or three years, to protect their 
equities in the reserve and surplus accumulations on the ordinary 
forms of policies. It includes the great Tontine Companies, and 
companies generally who issue policies in which the Tontine ele- 
ment predominates to a greater or less extent. Investment 
combined with Cheap Life Insurance is a prominent 
idea with the companies in this class. 

The dividends paid by the leading companies of this class, 
with rare exceptions, if an}^ on the same kind of policies— other 
things being equal — , are larger than those paid by leading 
companies in the other classes, because their policies are for- 
feitable; and, generally, any grade of companies in this class 
can pay larger dividends than can the same grade of companies 
in the other classes, for the same reason. Every policy-holder in- 
sured in this class of companies must attend to the 'prompt pay- 
ment of his premium, on or before 12 o'Clock Noon, of the 
day when it becomes due, or he will be liable to a greater or less 
loss, according to the kind and amount of his policy, and the 
length of time it has been in force ! 

The New York Life Insurance Law. — On the second of 
May, 1879, the Legislature of the State of New York passed what 
has been called, in some of our insurance literature, " The non- 
forfeiture law of New York." The following is the law, and we 
have italicised such clauses as serve to make it wholly useless as a 
non-forfeiture act. 

u Section 1. — Whenever any policy of life insurance hereafter 
issued by any company organized or incorporated under the laws 



OF LIFE INSURANCE. 95 

« 

of this State, after being in force three full years, shall by its 
terms lapse or become forfeited for the non-payment of any 
premium, or of any note given for a premium, or loan made in 
cash on the policy as security, or of any interest on such note or 
loan, unless the provisions of this act are specifically waived in the 
application, and notice of such waiver written in red ink on the 
margin of the face of the policy when issued, the reserve on such 
policy, including dividend additions, calculated at the date of the 
failure to make any of the payments above described, according 
to the American Experience Table of Mortality, and with inter- 
est at the rate of four and a half per cent, per annum, after de- 
ducting any indebtedness of the insured on account of any 
annual, semi-annual or quarterly premium then due ; and any 
loan in cash on such policy, evidence of which is acknowledged 
by the insured in writing, shall, on demand made, with surrender 
of the policy within six months after such lapse, be taken as a 
single premium of life insurance at the published rates of the 
company at the time the policy was issued, and shall be applied, 
as shall have been agreed in the application and policy, either to 
continue the insurance of the policy in force at its full amount, 
so long as such single premium will purchase temporary insur- 
ance for that amount, at the age of the insured at the time of 
lapse, or to purchase upon the same life, at the same age, paid-up 
insurance payable at the same time, and under the same condi- 
tions except as to payment of premiums, as the original policy. 
Provided, that if no such agreement be expressed in the applica- 
tion and policy, the said single premium may be applied in either 
of the modes above specified, at the option of the owner of the 
policy; notice of such option to be contained in the demand 
hereinbefore required to. be made to prevent the forfeiture of the 
policy. Provided, also, that the net value of the insurance given 
for such single premium under this section, computed by the 
standard of this State, shall in no case be less than two-thirds 
of the entire reserve after deducting the indebtedness as speci- 
fied ; but such insurance shall not participate in the profits of 
the company. 

" Seo 2. — If the reserve upon any endowment policy, applied 
according to the preceding section as a single premium of tem- 
porary insurance, be more than sufficient to continue the insur- 
ance to the end of the endowment term named in the policy, and 
if the insured survive the term, the excess shall be paid in cash 
at the end of such term, on the conditions on which the original 
policy wsps issued. 

" Sec. 3.— This act shall take effect on the first day of 
January, 1880/' 

The following are examples of policies issued by one of the 
most prominent companies of the C. class. The results speak 
for themselves : 

Policy No. 49,138; Amount, $2,000; Date, July 11, 1866; 
Age, 26 ; Kind of Policy, 19- Year Endowment requiring 
Nineteen Annual Payments of $93.84, each. 

The Company paid, July 11, 1885 , .$2,000.00 

And dividend additions 758.90 



Total paid by Company 2,758.90 



96 THE THREE SYSTEMS 



• 



The insured paid $93.84 per year for 19 years— of which 
$86.05 per annum was made to earn, by the Company, five per 
cent, compound interest, principle and interest amounting to 
exactly $2,759.68, a trifle more than the sum paid on maturity of 
endowment. The difference between $93.84 and $86.05, which is 
$7.79, was the annual cost of the insurance! 

(The above premium was paid in two equal semi-annual payments of $46.92, each. 

Policy No. 99,074; Amount, $3,000; Date, June 28, 1869; 
Age, 25 ; Kind of Policy, 15-Year Eiidowment requiring 
Fifteen Annual Payments of $198.06, each. 

The company paid, June 28, 1884. .... $3,000.00 

And dividend additions 1,030.32 

Total paid by company $4,030.32 

The insured paid $198.06 per year for 15 years — of which 
$177.90 per annum was made to earn, by the company, five per 
cent, compound interest, principle and interest amounting to 
$4,030.77, a few cents more than the sum paid on maturity of en- 
dowment. The difference between $198.06 and $177.90, which is 
$20.16, was the annual cost of the insurance! 

Policy No. 156,482 ; Amount. $5,000 ; Date, May 6, 1874 ; 

Age, 25; Kind of Policy, 10-Year Endowment requiring Ten 

Annual Payments of $540.40, each. 

The Company paid, May 6, 1884 $5,000.00 

And dividend additions 1,066.55 

Total paid by Company $6,066.55 

The insured paid $540.40 per annum for 10 years, of which 
$459.36 per annum was made to earn, by the Company, five per 
cent, compound interest, principle and interest amounting to 
exactly $6066.66, a trifle more than the sum paid on maturity of 
the endowment. The difference between $540.40 and $459.36, 
which is $81.04, was the annual cost of the insurance! 

(The above premium was paid in two equal semi-annual payments of $270.20 each. 

A very remarkable Life Insurance Law- In 1868 a 
very remarkable statute was enacted by the Legislature of Iowa, 
intended as a complete protection of the reserves of policy holders 
who insure in companies organized under it, against the possible 
dishonesty and mal-feasance of Life Insurance officials. The law 
is as follows : 

Sec 1169, chap. 5, of the Laws of Iowa (code of 1873).— " As 
soon as practicable after the filing of said statement of any com- 
pany organized or doing business under the laws of this State, in 
the office of the Auditor of State, he shall proceed to ascertain 
the net cash value of each policy in force, upon the basis of 
the American Experience Table of Mortality, and four and a-half 



OF LIFE INSURANCE. 97 

per cent.' interest, or the Actuaries' Combined Experience Table of 
Mortality, with interest at four per cent. * * * For 

the purpose of making such valuations, when not already made 
as aforesaid, the auditor may employ a competent actuary to do 
the same, who shall be paid by the company for which the service 
was rendered; but nothing herein shall prevent any company from 
making said valuation herein contemplated, which shall be re- 
ceived by the auditor upon such proof as he may determine. 
Upon ascertaining the net cash value of policies in force in any 
company organized Under the laws of this State, or doing business 
in this State, and which has not made the deposit required in 
Section 1164 of this chapter" — (refers to the requirements of the 
States under whose laws the foreign companies were incorpora- 
ted)— "the auditor shall notify said company of the amount, and 
within thirty days after the date of such notification the officers 
of such company shall deposit with the auditor the amount of 
such ascertained valuation of all policies within this State in 
the securities described in section 1179 of this chapter.'' 

Reserve Deposit feature of the foregoing law; to illlustrate 
this we give the following example of a policy in force: 

Policy, No. 1857; Amount, $3,000; Age, 18; Date of 
Policy, March 14, 1874 ; Kind of Policy, Ordinary Life 
requiring the payment of $26.78, semi-annually, during 

LIFE. 

On tlds policy the dividends have been applied to the purchase of 
paid-up additions. 

Dividend, 1875, end 1st year, 19.9 per cent, of 

annual premium $10 . 68 

Paid-up addition to policy 40.52 

Dividend, 1876, end 2d year, 25.5 percent, of an- 
nual premium $18 . 71 

Paid-up addition to policy 51.82 

Dividend, 1877, end 3d year, 26.3 per cent, of an- 
nual premium $14.12 

Paid-up addition to policy 52.38 

Dividend, 1878, end 4th year, 27. 9 per cent, of an- 
nual premium $14.98 

Paid-up addition to policy 54.52 

Dividend, 1879, end 5th year, 29.9 percent, of an- 
nual premium $16.06 

Paid-up addition to policy 57.35 

Dividend, 1880, end 6th year, 30.8 per cent, of an- 
nual premium $16 . 54 

Paid-up addition to policy 57.90 

Dividend, 1881, end 7th year, 32.8 percent, of an- 
nual premium $17.60 

Paid-up addition to policy 60.45 

Dividend, 1882, end 8th year, 34.6 per cent, of an- 
nual premium $18.55 

Paid-up addition to policy 62.55 

Dividend, 1883, end 9th year, 36 per cent, of an- 
nual premium $19 . 50 

Paid-up addition to policy 64.35 



98 



THE THREE SYSTEMS 



Dividend, 1884, end 10th year, 37. 9 per cent, of an- 
nual premium $20. 35 

Paid-up addition to policy 65.70 

Dividend, 1885, end 11th year, 40 per cent, of an- 
nual premium $21 .46 

Paid-up addition to policy 68.00 

Total additions in 11 years $635 .54 

Total premiums paid in 11 years. . . 589 . 16 

Excess of additions over premiums paid.. $46.38 

Bemark — At the end of the 11th policy year the reserve of 
policy and additions, according to the Actuaries' Table, and 4 % 
interest, the standard required by the State, amounted to $415.94! 
This amount, according to the preceding law, is now deposited in 
the office of the State Auditor, in securities prescribed by legisla- 
tive enactment. 

The following is an assumed example of a Tontine policy, 
with ordinary life premium rate: 

Amount of Policy, $10,000 ; Annual Premium, $226.30 ; Age 
at Issue, 30 ; Kind op Policy, Ordinary Life ; Tontine Pe- 
riod, 20 Years. 





Annual Pre- 


Reserve at 4 per 




Annual Pre- 


Reserve at 4 per 


Year. 


mium. 


cent. Actuaries. 


Year. 


mium. 


cent. Actuaries 


1st 


$226.30 


$ 93.07 


11th 


$226.30 


$1,207.70 


2d 


226.30 


189.14 


12th 


226.30 


1,340 62 


3d 


226.30 


288.28 


13th 


226.30 


1,477.91 


4th 


226.30 


390.60 


14th 


226.30 


1,619.25 


5th 


226.30 


496.29 


15th 


226.30 


1,764. J 9 


6th 


226.30 


605.40 


16th 


226.30 


1,912.50 


7th 


226.30 


718.04 


17th 


. 226.30 


2,063.61 


8th 


226.30 


834.53 


18th 


226.30 


2,217.47 


9th 


226.80 


954.81 


19th 


226.30 


2,373.88 


10th 


226.30 


1,079.13 


20th 


226.30 


2,532.94 



Let it be assumed that a person at age 30 has under considera- 
tion the investment in such a policy as above described, and 
that he is quite favorably inclined to close the contract. Be- 
fore doing so, however, he should be quite sure that he under- 
stands it. What does the insured, under the contract, promise to 
do ? The contract lived up to on the part of the insured, what 
does the company promise to do ? The insured promises to pay 
to the company $226.30, every year, during his natural life, and to 
live up to all the other requirements of the policy contract as to 
occupation, residence, habits, etc., etc., and the company agrees 
to pay $10,000, in cash, soon after his death, to the beneficiary or 
beneficiaries named in the policy. It is a simple, straight, Ordi- 
nary Life Policy contract — with this addition: 



OF LIFE INSURANCE. 99 

During the first twenty years the insured agrees to pay the 
$226.30 per year, in full He is to receive no dividends during 
that period. He is not only to receive no dividends, but no divi- 
dends are to be placed to his credit during that time. If he die 
during the twenty years, the company agrees to pay the face value 
of the policy, only. If the insured live only one single day less 
than the entire twenty years from date of policy, having paid 
twenty full annual premiums, in cash, only the face value of the 
policy will be paid. He must not only pay twenty annual pre- 
miums but he must also live twenty entire years, from date of con- 
tract, and fulfill all the other conditions of the policy contract, 
before he will be entitled to any dividends, whatever. This 
twenty years is called The Tontine Period. 

During the Tontine Period, all the dividends that he might 
have received, and used, in annual reduction of premiums, had 
the policy not been a Tontine, are accumulating in what is called 
the Tontine surplus fund, and are being compounded, annually, 
at the average rate of interest, from year to year, realized by th^ 
company on all its invested funds. These dividend accumula- 
tions, from his own policy, as said before, are not placed to hk 
individual credit, on the books of the company — they may be 
kept in memoranda — but they are credited to the general Tontine 
surplus fund of his class. 

If the policy were an Ordinary one, not a Tontine, and the 
dividends were to average, say, $75.44 per annum, and were left 
with the company to be compounded annually at five per cent, 
interest, at the end of the twenty years they would amount to 
$2,619.20. This would be the entire amount of his dividends, 
from all sources, under the assumptions made. 

How much would the above result be increased, if the policy 
were a Tontine, and the insured were to persist in living and 
paying^ and complying with all the other conditions of the con- 
tract, until the expiration of the 20-year Tontine period ? Of 
course no one can answer this question, not even the Tontine 
companies, themselves, except approximately. There are three 
great Tontine companies doing business in America. One of 
these has estimated the amount of surplus at the end of the Tontine 
period, on the kind and amount of policy assumed, at $3,256.70. 
This is $637.50 more than the estimated surplus, if the policy 
were a Non-Tontine ! Another estimates the Tontine sur- 
plus at $4,697.00 ; or, $2,077.80 more than if it were a Non- 
Tontine ! The third company makes no estimates. The first 
of the above companies, in its recent sworn testimony before 
the Ohio Senate Committee, stated that the Tontine surplus, at 
the end of the tenth year, on a $3,000 policy in that company, 
issued at age 31, was $269.79; that the dividends paid on the 
same kind of a Non-Tontine policy, same amount and age, 
during first ten years, compounded at six per cent., amounted to 

Lire 



100 THE THREE SYSTEMS 

only $141.42, showing a difference in favor of the Tontine 
policy of $128.37, or 91 per cent., end of the first ten years. Tak- 
ing the statement thus sworn to by the New York company, as 
the basis of estimates for the entire Tontine period, we have the 
following: The estimated Non-Tontine dividends, as stated be- 
fore, amount to $2,619.20. Add 91 per cent, and the result is 
$5,002.67, the estimated Tontine surplus at the end of the 
Tontine period; but this result far exceeds the estimates of any 
Tontine company, on this kind of a policy, showing plainly that 
either our assumptions of the dividends are too high on a Non- 
Tontine policy in tnat company, or, that the Tontine Dividends 
would not average as large during the entire 20-year Tontine pe- 
riod as they did the first ten years of that period. 

Now let it be assumed that the policy holder in our assumed ex- 
ample has lived through the 20-year Tontine period. What are 
the advantages over a similar Non-Tontine policy, at the end 
of the first twenty years ? 

1. If the policy were a Non-Tontine in the same company, 
— a Tontine Company— he would have to apply to the company 
to ascertain how much cash, orhowlarge a paid-up policy , would be 
given on surrender of the original policy. This application would 
have to be made before the twenty -first annual premium became 
due, or the policy would lapse. It must be attended to promptly. 
The company has, in the reserve accumulations, $2,532.94, and we 
have assumed that the accumulated dividends amount to $2,619.20, 
making, altogether, $5,152.14, in cash, to the credit of the policy 
in the hands of the company— it is a Non-Tontine policy, re- 
member! How much of this $5,152.14 would the company 
probably pay the insured, in cash, on the legal surrender of the 
policy? Probably not more than one-half of it, or thereabouts, say 
$2,700— possibly, $3,000. If he preferred a paid up policy to the 
cash, he would receive what the $3,000 at his present age would 
purchase at the company's loaded rate ! If the policy were a Ton- 
tine, how much cash, or paid-up, would the company give him 
upon legal surrender of the original policy? One of the three 
great Tontine Companies guarantees $2,173.90, in cash, but 
estimates it at $5,680. Its estimated equivalent paid-up is 
$12,150! Another Tontine Company guarantees $2,270.05 in 
cash, hut estimates it at $7,120. Its estimated equivalent paid-up 
is $16,500! The third guarantees a cash surrender value of 
$2,532.94, but makes no estimates as to what it can probably do 
better than this. 

It is well to remark here that the guarantee cash surrender 
values above, are the entire reserves as kept by the several com- 
panies, and the estimated cash values are these reserves augmented 
by the estimated surplus. It should further be remarked that 
when the cash surrender value is sufficient to purchase a larger 



OP LIFE INSURANCE. 101 

paid-up policy than the original one, medical examination is re- 
quired for the additional insurance. 

(2_) The cash surrender value or equivalent paid-up, at the 
end of the Tontine period is not the only option on the part of 
the insured. There are several others, with reference to which 
the reader is referred to Chapter Y of this book. 

If the assumed policy were a Semi-Tontine, instead of a 
Tontine, any time after three years from its date, it could be 
surrendered for a paid-up, the insured forfeiting only the accrued 
surplus. 

The following is the history of a Tontine Policy, in one 
of the great Tontine companies above referred to: 

Policy Xo. 44,193; Amount of Policy $10,000; Kind of 
Policy, Ordinary Life, Tontine Policy; the Tontine Period, 
15 Years; Annual Premium, $324.70; Age, 41; Date of Policy, 
June 8th, 1869. 

During the Tontine period of fifteen years, the insured paid 
fifteen annual premiums, in cash, of $324.70 each, amounting to 

$4,870.50. 

At the end of the Tontine period June 8th, 1884, 
the insured had the privilege of choosing any one of 
the following methods of settlement. 

I. He could surrender the original policy to the Company, 
and receive, in cash, $5,530.70. After having had $10,000 insur- 
ance for 15 years for nothing, he could retire with $660, cash, over 
and above the total sum he had paid ; or, 

IT. He could surrender the original Policy and receive a Paid- 
up Policy for $10,260 upon which no further payment of pre- 
miums would ever be required ; or, 

IH. He could convert the surplus, $2,918.10 into an annuity 
for life, $243.50 per year, and apply it in annual payment of fu- 
ture premiums, thus continuing the original policy. This life 
annuity, of $243.50, would alone reduce the annual premium from 
$324.70 to $81.20, and the future annual cash dividends would 
very nearly, if not quite, pay the balance. This was the option 
accepted by the insured ; and, in 1885, the annuity together with 
the dividend of 1885, more than paid the annual premium, so 
that the company receipted for the annual premium, and paid 
the insured $17.20 in cash. 

At the end of the Tontine period, the options, in percentages, 
were as follows: 

1. Cash surrender value of the Policy was 114 per 
cent, of the total premiums paidl 



102 THE THREE SYSTEMS 

2. Amount of Paid-up Policy was 211 per cent. 

of the total premiums paid ! 

3. The cash surplus was 60 per cent, of the total 

premiums paid ! 

Example of a Matured Tontine. 

Policy, No. 114,285; Amount, $10,000; Date, May 7, 1875; 
Kind of policy, Ordinary Life ; Annual premium, $350.50 ; 
Tontine Period, lO years. 

Results: The insured paid the premiums, in full, during the 
10-year Tontine period, amounting to $3,505. By the provi- 
sions of the policy-contract, at the end of the ten years he was 
entitled to the benefit of the following options : 

1. He could surrender his policy and receive from 
the company, in cash, $3,036 ; or, 

2. He could surrender his policy and receive a paid- 
up FOR $6,045, NON-PARTICIPATING ; OR, 

3. HE COULD SURRENDER HIS POLICY AND RECEIVE AN AN- 
NUITY FOR LIFE OF $258.00, PER YEAR ; OR, 

4. HE COULD SURRENDER HIS ACCUMULATED SURPLUS, 
$1,255, CONTINUING HIS POLICY, AND RECEIVE AN ANNUITY FOR 
LIFE OF $77.00 PER YEAR TO BE USED IN PAYMENT OF FUTURE 
PREMIUMS. 

He selected the second of the above options, and reinsured on 
the Tontine plan, May, 1885. 

Our readers must not be misled in comparing the above results 
with those of the 15-year Tontine preceding it. There is no basis 
for accurate comparison of the two. 

Terminable Endowments ; Reserve Endowments ; A 

CERTAIN KIND OF LlFE-RaTE ENDOWMENTS ; FlVE-YEAR DIS- 
TRIBUTION POLICIES, ETC., ETC., ARE FORMS OF POLICY- CONTRACTS 
IN WHICH THE TONTINE ELEMENT PREVAILS TO A GREATER OR 
LESS EXTENT ; BUT TO ILLUSTRATE THEM ALL, BY EXAMPLES, 
WOULD REQUIRE MORE SPACE THAN A WORK OF THIS CHARACTER 
PERMITS. 

We present in the pages immediately following the records of the 
principal level premium companies from 1872 to 1890 inclusive. 



OF LIFE INSURANCE. 



103 



J3TNA LIFE INSURANCE COMPANY OF HART- 

FORD, CONN. 



MORGAN G. BULKELEY, President. 



Commenced Business 1850. Paid-up Capital, $1,000,000. 

The following is its official record from 1850 to 1890 inclusive, as 
shown by Reports from the Insurance Departments, from year to 
year : 





Assets 


Insurance in Force 


New Insurance 


Year. 


December 31. 


December 31. 


During Year. 


1872 


$17,608,185 


$100,617,772 


$15,334,287 


1873 


18 946,579 


98,864,149 


17,333,108 


1874 


20.429,864 


94,506,992 


15,182,318 


1875 


21,822,292 


91,454,011 


11,348,277 


1876 


23,194,555 


87,385,555 


9,557,263 


1877 


24,030,578 


82,719,074 


8,078,168 


1878 


25,006,896 


79,568,066 


6,923,524 


1879 


25,503,138 


77,738,038 


6,609,904 


1880 


26,327,267 


77,951,819 


6,994,175 


1881 


26,986,526 


79,772,425 


8,293,370 


1882 


28,018,029 


82,928,860 


9,594,636 


1883 


29,017,935 


85,040,335 


10,114,585 


1884 


29,682,926 


84,663,591 


8,094,226 


1885 


30,499.508 


87,791,243 


11,111,960 


1886 


31,463,988 


92,262,969 


13,133,547 


1887 


32,550,688 


97,372,334 


14,486,886 


1888 * 


33,743,010 


102,904,303 


16,233,553 


1889 


34,741,130 


110,669,719 


20,399,690 


1810 


35,993,002 


117,656,382 


21,406,821 



104 



THE THREE SYSTEMS 



BEBKSHIKE LIFE INSURANCE COMPANY OF 
PITTSFXELD, MASS. 



WM. R. PLUNKETT, President. 



Commenced Business 1851. Paid-up Capital, $25,500. 



The following is its official record from 1851 to 1890 inclusive, as 
shown by Reports from the Insurance Departments, from year to 
year : 





Assets 


Insurance in Force 


New Insurance 


Year. 


December 31. 


December 31. 


During Year. 


1872 


$2,181,629 


$10,450,413 


$2,014,667 


1873 


2,510,762 


10,734,043 


1,821,717 


1874 


2,835,487 


10,823,154 


1,864,160 


1875 


3,074,571 


10,940,216 


1,799,041 


1876 


3,235,521 


12,331,015 


2,425,305 


1877 


3,271,252 


11,653,069 


2,233,891 


1878 


3,296,964 


11,116,576 


2,073,090 


1879 


3,424,056 


11,458,633 


2,546,419 


1880 


3511,178 


11,930,030 


2,482,267 


1881 


3,577,062 


12,363,205 


2,481,384 


1882 


3,577,134 


13,005,262 


2,676,313 


1883 


3,676,140 


14,122,913 


2,962,135 


1884 


3,749,927 


15,010,306 


3,083,244 


1885 


3,796,168 


16,209,314 


3,824,093 


1886 


3,850,055 


17,877,227 


4,599,474 


1887 


3,902,872 


19,657,323 


5,146,376 


1888 


4,122,343 


21,901,288 


5,431,753 


1889 


4,393,249 


25,054,963 


6,921,888 


1890 


4,700,724 


28,374,563 


7,492,805 



OF LIFE INSURANCE. 



105 



THE CONNECTICUT MUTUAL LIFE INSURANCE 
COMPANY OF HARTFORD, CONN. 



JACOB L. GREENE, President. 



Commenced Business 1846. Mutual. 



The following is its official record from 1846 to 1890 inclusive, as 
shown by Reports from the Insurance Departments, from year to 
year: 




106 



THE THREE SYSTEMS 



EQUITABLE LIFE ASSURANCE SOCIETY OF THE 
UNITED STATES. 



HENRY B. HYDE, President. 



Commenced Business i8jg. Paid-up Capital, $100,000. 



The following is its official record from 1859 to 1890 inclusive, as 
shown by Reports from the Insurance Departments, from year to 
year : 



Year. 


Assets 
December 31. 


Insurance in Force 
December 31. 


New Insurance 
During Year. 


1872 


$19,160,528 


$171,443,351 


$51,911,079 


1873 


; 2,378,215 


184,282,130 


53,452,578 


1874 


25,606,848 


181,028,001 


34,189,815 


1875 


28,585,041 


178,632,686 


30,538,017 


1876 


30,872,374 


173,050,690 


25,020,577 


1877 


33,058,000 


160,821,416 


20,712,793 


1878 


35,015,676 


157,737,356 


21,440,213 


1879 


37,000,917 


162,357,715 


26,502,541 


1880 


40,706 401 


177,597,703 


35,170,805 


1881 


44,078,021 


200,679,019 


46,189,096 


1882 


47,756,079 


232,829.620 


62,262,279 


1883 


52,363,254 


275,160,588 


81,129,756 


1884 


57,548,716 


309,409,171 


84,877,057 


1885 


65,547,594 


357,338,246 


96,011,378 


1886 


74,332,973 


411,779,098 


111,540,203 


1887 


82,975,682 


483,029,562 


138,023,105 


1888 


93,313,329 


549,216,126 


153,933,535 


1889 


105,361,360 


631,016,666 


175,264,100 


1890 


116,887,786 


720,662,473 


203,826,107 



OF LIFE INSURANCE. 



107 



GERMANIA LIFE INSURANCE COMPANY OP 

NEW YORK. 



HUGO WESENDONCK, President. 



Commenced Business i860. Paid-up Capital, $200,000. 



The following is its official record from i860 to 1890 inclusive, as 
shown by Reports from the Insurance Departments, from year to 
year : 



Year. 


Assets 
December 31. 


Insurance in Force 
December 31. 


New Insurance 
During Year. 


1872 


$5,256,925 


$34,600,264 


$4,387,078 


1873 


5,920,675 


34,842,813 


4,078,615 


1874 


6,640,004 


34,090,100 


3,344,532 


1875 


7,304,524 


34,421,675 


4,129,601 


1876 


.7,910,109 


34,056,313 


3,653,178 


1877 


8,021,944 


32,817,295 


3,078,174 


1878 


8,268,612 


32,191,263 


3,270,448 


1879 


8,552,877 


82,695,995 


3,729,432 


1880 


9,003,151 


33,885,522 


4,151,662 


1881 


9,456,242 


35,506,650 


4,784,705 


1882 


9,893,670 


36,895,148 


4,733,696 


1883 


10,402,356 


38,153,663 


4,530,825 


1884 


10,857,819 


38,965,120 


4,246,737 


1885 


11,485,386 


39,992,080 


4,887,842 


1886 


12,310,626 


41,817,338 


5,320,065 


1887 


13,073,247 


43,634 805 


5,447,846 


1888 * 


13,961,200 


48,874,233 


9,482,758 


1889 


14,825,966 


53,275,386 


10,051,548 


1890 


15,736,711 


57,322,242 


10,015,716 



108 



THE THREE SYSTEMS 



HOME LIFE INSURANCE COMPANY OF NEW 

YORK. 



CHARLES A. TOWNSEND, President. 



Commenced Business i860. Paid-up Capital \ $125,000. 



The following is its official record from i860 to 1890 inclusive, as 
shown by Reports from the Insurance Departments, from year to 
year : 





Assets 


Insurance in Force 


New Insurance 


Year. 


December 31. 


December 31. 


During Year. 


1872 


$3,346,153 


121,466,111 


$2,427,130 


1873 


3,729,679 


21,769,083 


2,532,842 


1874 


4,113,905 


20,932,412 


1,954,609 


1875 


4,475,117 


20,522,578 


1,495,239 


1876 


4,730,123 


19,902,744 , 


1,687,767 


1877 


4,778,164 


16,800,407 


1,408,533 


1878 


4,803,770 


15,308,663 


1,030,263 


1879 


4,829,057 


14,308,463 


1,231,234 


1880 


4,921,137 


14,348,067 


1,504,435 


1881 


5,037,322 


14,965,079 


2,216,627 


1882 


5,185,685 


15,696,414 


2.385,235 


1883 


5,403,543 


16,874,646 


3,065,544 


1884 


5,457,588 


16,957,595 


2,253,514 


1885 


5,646,478 


17,819,416 


2,791,571 


1886 


. 5,855,842 


19,450,061 


4,164,797 


1887 


6,110,909 


21,756,596 


5,211,041 


1888 


6,355,799 


22,748,299 


4,942,999 


1889 


6,694,305 


25,879,171 


6,764,102 


1890 


7,208,949 


29,027,638 


7,391,312 



OF LIFE INSURANCE. 



109 



THE MANHATTAN LIFE INSURANCE COMPANY 
OF NEW YORK. 



HENRY B. STOKES, President. 



Commenced Business 1850. Paid-up Capital, $100,000. 



The following is its official record from 1850 to 1890 inclusive, as 
shown by Reports from the Insurance Departments, from year to 
year : 





Assets 


Insurance in Force 


New Insurance 


Year. 


December 31. 


December 31. 


During Year. 


1872 


$8,270,870 


$42,343,613 


$4,991,710 


1873 


8,847,448 


42,000,529 


5,374,713 


1874 


9,561,403 


41,541,665 


5,290,360 


1875 


9,977,473 


40,083,863 


4,020,992 


1876 


10,045,613 


38,942,758 


3,904,967 


1877 


9,855,645 


36,318,549 


3,009,120 


1878 


10,011,792 


34,263,345 


2,507,067 


1879 


10,049,157 


33,332,618 


2,902,706 


1880 


10,151,289 


32,603,125 


2,802,873 


1881 


10,348,239 


32,254,439 


2,742,638 


1882 


10,662,477 


32,690,470 


3,521,947 


1883 


10,871,184 


33,023,205 


3,551,987 


1884 


11,046,053 


33,997,130 


4,440,814 


1885 


11,155,827 


34,467,139 


4,490,590 


1886 


11,310,058 


36,251,889 


5,921,229 


1887 


11,433,196 


39,018,611 


7,691,774 


1888- 


11,543,049 


43,504,413 


11,079,486 


1889 


11,729,400 


51,137,066 


17,388,211 


1890 


12,281,660 


54,500,754 


12,962,401 



? 



110 



THE THREE SYSTEMS 



MASSACHUSETTS MUTUAL LIFE INSURANCE 
COMPANY OP SPRINGFIELD, MASS. 



M. V. B. EDGERLY, President. 



Commenced Business fSjf. Mutual. 



The following is its official record from 1851 to 1890 inclusive, as 
shown by Reports from the Insurance Departments, from year to 
year : 




OF LIFE INSURANCE. 



Ill 



THE MICHIGAN" MUTUAL LIFE INSURANCE 
COMPANY OF DETROIT, MICH. 



Hon. T. W. PALMER, President. 



Commenced Business i86j. Paid-tip Capital, $250,000. 



The following is its official record from 1867 to 1890 inclusive, as 
shown by Reports from the Insurance Departments, from year to 
year : 




This company is a typical Western Institution. Organized in 
1867, by the solid business men and financiers of Detroit, it at once 
started out on a successful career and is to-day recognized as one of 
the prosperous Life Insurance Companies of the country. Having 
established its name and business at home, and secured the confidence 
ot the people of its own State, it then branched out to other States to 
which its home standing has followed it. The company is financially 
strong, progressive in its management, and successful in its business. 



112 



THE THREE SYSTEMS 



THE MICHIGAN MUTUAL LIFE INSURANCE 
COMPANY OF DETROIT, MICH. 

This progressive and solid organization dates from the year 1867, 
when it was incorporated with John J. Bagley as president, afterward 
Governor of Michigan. He was succeeded by Jacob S. Farrand, 
who continued as president up to the time of his death in April, 1891, 
the vacancy in the office of president being afterwards filled by the 
election of Hon. Thomas W. Palmer, who had been identified with 
the affairs of the company for many years as a director. 

In the following tabulated statement of the company's business is 
witnessed the safe accumulation and constant increase of its assets 
and the steady rise of its surplus and insurance in force : 



Date. 


Insurance in 
Force. 


Gross 
Assets. 


Surplus. 


January 1, 1884 


$10,500 840.00 


$1,231,878.00 


$281,110.00 


January 1, 1885 


11,728 104.00 


1,380,876.00 


291,188.00 


January 1, 1886 


13,688,220.00 


1,537,503.00 


296,035.00 


January 1, 1887 


16,550,411.00 


1,765,333.00 


305,225.00 


January 1, 1888...... 


18,078,156.00 


1,996,189.00 


312,378.00 


January 1, 1889 


19,099,380.00 


2,291,221.00 


347 940 00 


January 1, 1890 


20,373,636.00 


2,613,313.00 


397 960.00 


January 1 1891 


22,822,721.00 


3,007,553.13 


439,556.95 



These figures incontestably evidence the careful, prudent and syste- 
matic management and the progressive nature of the company, which, 
from small beginnings, has culminated in one of the strongest and 
most conservative institutions of its character in existence. Its busi- 
ness during 1890 amounted to over $5,000,000 of new insurance, and 
in 1891 it will probably write over $6 000,000. 

The present officers of the company are as follows : Hon. T. W. 
Palmer, President ; Samuel R. Mumford, Vice-President ; O. R. 
Looker, Secretary ; H. F. Frede, Assistant Secretary ; G. W. San- 
ders, Actuary. 



OF LIFE INSURANCE. 



113 



MUTUAL BENEFIT LIFE INSURANCE COMPANY 
OF NEWARK, N. J. 



AMZI DODD, President. 



Commeitced Business 1845. Mutual. 



The following is its official record from 1845 to 1890 inclusive, as 
shown by Reports from the Insurance Departments, from year to 
pear : 



Year. 


Assets 
December 31. 


Insurance in Force 
December 31. 


New Insurance 
During Year. 


1872 


126,488,232 


$133,164,169 


$9,573,063 


1873 


28,620,956 


131,443,818 


8,912,359 


1874 


30,625,126 


131,938,427 


11,178,803 


1875 


31,300,678 


134,104,103 


12,549,545 


1876 


33,336,417 


131,846,985 


9,674,429 


1877 


34,299,045 


126,193,045 


7,016,891 


1878 


34,853,625 


119,179,592 


5,271,180 


1879 


35,239,570 


117,720,246 


7,917,612 


1880 


35,726,816 


121,466,979 


13,025,391 


1881 


35,718,812 


127,411,677 


14,523,938 


1882 


36,300,972 


129,619,105 


11,031,145 


1883 


37,581,431 


133,298,768 


13,256,376 


1884 


38,607,396 


135,843,543 


13,678,384 


1885 


39,625,995 


139,416,807 


14826,354 


1886 


40,816,517 


143,186,656 


14,834,902 


1887 ■ 


42,110,662 


147,189,403 


16,078,824 


1S88 


43,514,461 


153,498,623 


18,911,241 


1889 


45,236,963 


162,617,014 


22,217,255 


1890 


46,997422 


172,840,944 


24,158,992 



114 



THE THREE SYSTEMS 



THE MUTUAL LIFE INSURANCE COMPANY OP 

NEW YORK. 



RICHARD A. McCURDY, President. 



Commenced Business 184J. Mutual. 



The following is its official record from 1843 to 1890 inclusive, as 
shown by Reports from the Insurance Departments, from year to 
year : 




OF LIFE INSURANCE. 



115 



THE NATIONAL LIFE INSURANCE COMPANY 

OF VERMONT. 



CHARLES DEWEY, President. 



Commenced Business iSjo. Mutual. 



The following is its official record from 1850 to 1890 inclusive, as 
shown by Reports from the Insurance Departments, from year to 
year : 



Year. 


Assets 
December 31. 


Insurance in Force 
December 31. 


New Insurance 
During Year. 


1872 


$1,372,177 


$8,764,448 


$2,058,504 


1873 


1,535,729 


9,086,023 


1,663,547 


1874 


1,729,261 


9,637,698 


1,802,177 


1875 


1,845,750 


9,919,536 


1,589,578 


1876 


2,074,807 


9,440,381 


1,111,191 


1877 


2,100,855 


8,562,232 


804,279 


1878 


2,191,613 


8,183,357 


703,025 


1879 


2,250,585 


8,306,052 


1,022,767 


1880 


2,386,737 


8,717,443 


1,020,348 


1881 


2,559,375 


9,516,360 


1,435,410 


1882 


2,768,288 


10,669,009 


2,096,818 


1883 


2,911,871 


12,121,725 


2,698,006 


1884 


3,181,162 


14,106,761 


3,683,605 


1885 


3,523,821 


16,579,518 


4,659,306 


1886 


3,880,523 


20,059,506 


6,088,563 


1887 * 


4,405,315 


24,922,324 


8,226,779 


1888 


5,167,543 


32,312,303 


11,976,388 


1889 


5,917,195 


38,767,541 


12,743.988 


1890 


6,763,845 


46,362,301 


15,148,426 



116 



THE THREE SYSTEMS 



THE NEW ENGLAND MUTUAL LIFE INSUR- 
ANCE COMPANY OF BOSTON, MASS. 



BENJAMIN. F. STEVENS, Ppesident. 



Commenced Business 1844. Mutual. 



The following is its official record from 1844 to 1890 inclusive, as 
shown by Reports from the Insurance Departments, from year to 
year : 




OF LIFE INSURANCE. 



117 



THE NEW YORK LIFE INSURANCE COMPANY 
OF NEW YORK. 



WILLIAM H. BEERS, President. 



Coni7nenced Business 1845. Mutual. 



The following is its official record from 1845 to 1890 inclusive, as 
shown by Reports from the Insurance Departments, from year to 
year : 



Year. 


Assets 
December 31. 


Insurance in Force 
December 31. 


New Insurance 
During Year. 


1872 


$21,533,062 


$118,622,606 


$27,096,274 


1873 


24,342,452 


123,672,387 


26,621,460 


1874 


27,179,394 


122,835,123 


21,809,389 


1875 


30 505,122 


126,132,119 


21,964,190 


1876 


33,163,715 


127,748,473 


20,062,111 


1877 


34,787,610 


127,901,887 


20,156,639 


1878 


36,643,924 


125,232,145 


15,949,986 


1879 


38,858,831 


127,417,762 


17,098,173 


1880 


43,031,142 


135,726,916 


22,229,979 


1881 


47,044,269 


151,760,824 


32,374,281 


1882 


50,550,982 


171,415,097 


41,325,520 


1883 


55,202,314 


198,746,043 


52,735,564 


1884 


58,941,739 


229 382,586 


61,484,550 


1885 


66,415,406 


259,674,500 


68,521,452 


1886 


74,921,927 


304,373,540 


85,178,294 


18^7 


82,506,354 


358,935,536 


106,749,295 


1888 


92,685,062 


419,886,505 


125,019,731 


1889 


104,415,322 


495,601,970 


151,119,088 


1890 


115,093,966 


569,338,726 


159,576,065 



118 



THE THREE SYSTEMS 



NORTHWESTERN MUTUAL LIFE INSURANCE 
COMPANY OF MILWAUKEE, WIS. 



H. L. PALMER, President. 



Commenced Business 1858. Mutual. 



The following is its official record from 1858 to 1890 inclusive, as 
shown by Reports from the Insurance Departments, from year to 
year : 



Year, 


Assets 
December 31. 


Insurance in Force 
December 31. 


New Insurance 
During Year. 


1872 


|12 349,811 


$64,182,874 


$14,361,933 


1873 


14.006,755 


64,692,003 


12,027,261 


1874 


15,457,315 


65,301,021 


11,796,029 


1875 


17,043,701 


67,124,215 


13,607,730 


1876 


17,995,863 


67,493,191 


12,375,829 


1877 


18,093,299 


64,416,847 


9,266,264 


1878 


17,910,037 


61.441,014 


8,108,407 


1879 


17,952,747 


61,948,888 


9,036,426 


1880 


18,295,331 


64,967,081 


9,801,281 


1881 


18,803,398 


74,503,740 


17,559,715 


1882 


19,752,296 


83,355,424 


18,719,669 


1883 


21,085,384 


92,083,093 


20,136,582 


1884 


22,497,773 


98,798,982 


21,057,952 


1885 


24,238,046 


110,710,861 


26,259,387 


1886 


26,648,075 


127,629,903 


31,446,673 


1887 


28,836,356 


147,615,323 


35,608,930 


1888 


32,650,860 


172,518,891 


43,577,360 


1889 


37,107 929 


202,405,923 


51,777,480 


1890 


42,338,259 


238,908,807 


62,236,609 



OF LIFE INSURANCE. 



119 



PENN MUTUAL LIFE INSURANCE COMPANY OF 
PHILADELPHIA, PA. 



EDWARD M. NEEDLES, President. 



Commenced Business 184J. Mutual. 



The following is its official record from 1847 to 1890 inclusive, as 
shown by Reports from the Insurance Departments, from year to 
year : 





Assets 


Insurance in Force 


New Insurance 


Year. 


December 31. 


December 31. 


During Year. 


1872 


$3,835,067 


$22,824,211 


$2,320,895 


1873 


4,101,133 


24,309,774 


4,146 346 


1874 


4,621,573 


24,521,171 


2,961,565 


1875 


5,337 238 


28,389,677 


6,556,543 


1876 


5,896.602 


31,053,301 


6,959,272 


1877 


6,242,230 


30,757,072 


5,371,841 


1878 


6,605,272 


29,274,597 


3,394,796 


1879 


7,006,306 


29,678,033 


4,027,139 


1880 


7,431,249 


31,608,564 


4,791,405 


1881 


7,839,278 


34,637,444 


6,017,976 


1882 


8,449,908 


38,194,522 


6,495,480 


1883 


8,957,141 


41,521,675 


6,846,525 


1884 


9,605,390 


43,979,860 


6,372,186 


1885 


10,338,654 


47,989,223 


8,430,635 


1886 


11,352,202 


53,911,873 


11,531,500 


1887 


12,519,093 


61,018,805 


12,817,177 


1888 


13,721,469 


68,372,882 


14,786,090 


1889 


15,093,494 


79,069,580 


18,418,000 


1890 


16,485,438 


90,278,701 


20,663,272 



120 



THE THREE SYSTEMS 



PHCENIX MUTUAL LIFE INSURANCE COMPANY 
OF HARTFORD, CONN. 



JONATHAN B. BUNCE, President. 



Commenced Business 1851. Mutual. 



The following is its official record from 1851 to 1890 inclusive, as 
shown by Reports from the Insurance Departments, from year to 
year : 




OF LTFE INSURANCE. 



121 



PROVIDENT LIFE ANT> TRUST COMPANY OF 
PHILADELPHIA, PA. 



SAMUEL R. SHIPLEY, President. 



Cojjimenced Business 1865. Paid-up Capital, $1,000,000. 



The following is its official record from 1865 to 1890 inclusive, as 
shown by Reports from the Insurance Departments, from year to 
year : 





Assets 


Insurance in Force 


New Insurance 


Year. 


December 31. 


December 31. 


During Year. 


1872 


$1,777,821 


$12,565,121 


$3,068,523 


1873 


2,127,029 


15,551,136 


4,646,726 


1874 


2,586,085 


17,714,531 


4,451,504 


1875 


3,093,155 


19,479,410 


4,158,670 


1876 


3,569,636 


20,847,199 


3,859,388 


1877 


3,952,543 


20,707,581 


3,085,131 


1878 


4,325,603 


20,984,554 


2,987,392 


1879 


4,773,219 


22,486,295 


3,895,033 


1880 


5,373,422 


25,755,451 


5,035,266 


1881 


6,053,955 


29,092,190 


5,069,031 


1882 


7,233,894 


32,764,062 


6,301,325 


1883 


8,292,041 


37,499,951 


7,353,511 


1884 


9149,210 


41,691,769 


7,610,632 


1885 


10,500,242 


45,678,669 


7,366,834 


1886 


11,938,869 


50,914,268 


8,647,132 


1887 


13,466,769 


57,137,653 


10,120,783 


1888 


15,094,824 


64,003,694 


11 675,441 


1889 


16,946,145 


71,816,566 


13,269,382 


1890 


18,606,619 


79,274,945 


13,241,355 



122 



THE THREE SYSTEMS 



STATE MUTUAL LIFE INSURANCE COMPANY 
OF WORCESTER, MASS. 



A. GEORGE BULLOCK, President. 



Commenced Business 1845. Mutual. 

The following is its official record from 1845 to 1890 inclusive, as 
shown by Reports from the Insurance Departments, from year to 
year : 




OF LIFE INSURANCE. 



123 



THE TRAVELERS INSURANCE COMPANY OP 
HARTFORD, CONN. 



JAMES G. BATTERSON, President. 
Commenced Business 1866. Paid-up Capitd, $600,000. 



The following is its official record from 1866 to 1890 inclusive, as 
shown by Reports from the Insurance Departments, from year to 
year : 



Year. 


Assets 
December 31. 


Insurance in Force 
December 31. 


New Insurance 
During Year. 


1872 


$1,354,656 


$14,575,777 


$4,058,505 


1873 


1,723,389 


16,550,743 


4,730,186 


1874 


2,103,178 


17,972,063 


5,086,263 


1875 


2,529,979 


19,169,114 


4,954,363 


1876 


2,908,382 


19,146.391 


4,100,396 


1877 


3,203,617 


18.690,183 


3,827,771 


1878 


3,421,737 


18,269.355 


3,261,964 


1879 


3,704,262 


18,182,132 


2,812,459 


1880 


4,044,811 


19,098,639 


3,295,137 


1881 


4,437,389 


20,511,522 


3,691,246 


1882 


4,767,938 


22,836,313 


4,531,375 


1883 


5,235,852 


25,005,604 


4,699,171 


1884 


5,680,683 


27,328,814 


5,643,515 


1885 


6,279,951 


29,806,131 


5,893,682 


1886 


7,023,895 


34,171,625 


8,635,199 


1887 


7,715,518 


37,739,893 


7,640,124 


1888 


8,455,815 


41,138,361 


7,657,158 


1889 


9,656,148 


44,978,949 


8,899,375 


1890 


10,466,489 


53,558,220 


14,329,153 



124 



THE THREE SYSTEMS 



UNION CENTRAL LIFE INSURANCE COMPANY 
OF CINCINNATI, OHIO. 

JOHN M. PATTISON, President. 



Commenced Business 1867. Paid-up Capital, $100,000, 

The following is its official record from 1867 to 1890 inclusive, as 
shown by Reports from the Insurance Departments, from year to year : 



Year. 


Assets 
December 31. 


Insurance in Force 
December 31. 


New Insurance 
During Year. 


1872 


$730,583 


$9,715,860 


$6,829,080 


1873 


870,212 


10,712,408 


3,994,770 


1874 


1,000,099 


11,523,318 


5,610,110 


1875 • 


1,144,290 


11,723,683 


2,975,791 


1876 


1,290,382 


10,866,185 


2,760,853 


1877 


1,341,399 


9,303,324 


2,009,167 


1878 


1,423,577 


8,184,403 


1,684,412 


1879 


1,498,096 


7,466,120 


1,350,408 


1880 


1,588,466 


8,345,649 


2,272,708 


1881 


1,679,317 


8,975,230 


2,511,648 


1882 


1,807,069 


11,068,311 


4,403,555 


1883 


1,956,610 


12,380,018 


5,156,204 


1884 


2,266,397 


14,053,261 


5,341,880 


1885 


2,731,905 


17,334,913 


7,233,331 


1886 


3,152,368 


22,539,569 


11,626,322 


1887 


3,768,585 


27,724,533 


14,026,168 


1888 


4,520,998 


33,870,922 


15,052,249 


1889 


5,575,497 


41,643,121 


19,628,595 


1890 


6,614,487 


50,055,701 


21,111,955 



For ten consecutive years the interest income of the company has 
more than paid all death claims, matured endowments, taxes and 
general office expenses. The low rate of mortality experienced has 
contributed to this result very materially. It has long been the claim 
of the management that the death rate is lower, continuously, than 
that of any other company. Taking the experience, year by year, for 
ten consecutive years, ending with 1890, and the death rate to mean 
amount of insurance in foice has been as follows : 1881 — .58 ; 1882 — 
.72; 1883— .94; 1884— .74; 1885— .73; 1886—59; 1887— .49; 
1888 — .63; 1889— .73; 1890 — .72. The average for the whole 
period is .63 cents on each one hundred dollars of insurance in force, 
or considerably less than three-fourths of one per cent., and far 
below the " expectation " of the Mortality Tables, 



OF LIFE INSURANCE. 



125 



UNION CENTRAL LIFE INSURANCE COMPANY 
OP CINCINNATI, OHIO. 

This company was organized in 1867 under the Ohio law, the 
provisions of which concerning life insurance are exceptionally 
stringent. 

The Union Central issues policies on the principal regular plans in 
use by the other companies, but makes a specialty of what is known 
as the Life-Rate Endowment Plan. The avowed purpose of this 
plan is to combine the feature of pure protection inherent in the ordi- 
nary life plan with that of investment as found in the regular 
endowment plan, at a premium charge identical with that of the life 
policy, in its various forms of limited and continuous payments. On 
this plan the assured pays in full the stipulated premium each year, 
which is placed to his credit together with the share of interest annu- 
ally earned thereby and his pro rata share of the profits from lapses 
and all other sources. He is debited with his share of death losses 
and expenses, and whenever the net amount to his credit equals the 
face of his policy it becomes, by its terms, a matured endowment 
and payable in cash. In case of prior death the policy is also pay- 
able in full. In order to illustrate the practical working of this plan 
we give herewith the record of a Life-Rate Endowment policy (No. 
8,297), as furnished by the company from its books. The policy is 
for $10,000, and was issued September 18, 1871, at age 42, at an an- 
nual premium of $337.20. The estimated time for its maturity as 
an endowment is 23 years from date of issue : 





Date and Amount of 






Surplus Deposit at End 




Premium Payments. 






of Policy Year. 




September 18 


1871 


.$337.20 


September 18, 1872... 


.. $m.36 


u 




1872 

1873. 


. 337.20 
. 337.20 


ii 


1873 


. . 450.55 


tt 


1874.... 


.. 733.43 


it 




1874 


. 337.20 


it 


1875 


.. 1,059.35 


u 




1875 


. 337.20 


'* 


1876. 


.. 1,460.09 


tt 




1876 


. 337.20 


tt 


1877 


.. 1,871.65 


l( 




1877 


. 337.20 


ii 


18,8... 


.. 2.288 96 


tt 




1878 


. 337.20 


tt 


1879 


.. 2,456.25 


It 


* 


1879 


. 337.20 


tt 


1880 


.. 2,822 82 


tt 




1880. 


. £37.20 


tt 


1881 


.. 3,202.09 


tt 




1881 


. 337.20 


it 


1882 


._ 3,616.29 


It 




1882 


. 337.20 


11 


1883 


.. 3,9J3.45 


It 




1883 


. 337.20 


it 


1884 


_. 4,422.42 


tt 




1884 


. 337.20 


tt 


1885. 


.. 4,885.19 


t 




1885 

1886 


. 337.20 
. 337.20 


ii 


1886 


. 5,376 25 


tt 


1887 


.. 5,926.00 






1887 


. 337.20 


ii 


1888 


.. 6,502.30 






1888 


. 337.20 


it 


1889 


.. 7,100.50 






1889 


. 337.20 


it 


1890 


.. 7,747 90 






1890.. 


. 337.20 


ii 


1891 


._ 8,419.00 



The estimated time of maturity for a Life-Rate Endowment, 
issued at the same age, on the Fifteen Annual Payment plan (pre- 
miums $478.40 each), or the Ten Annual Payment plan (premiums 
$621.90 each), is 20 years. 

The " surplus deposit " indicates the progressive net accumulations 
belonging to the policy each year until such accumulations equal its 
face. The accumulations increase more rapidly, in the nature of the 
case, as the age of the policy increases. 



126 



THE THREE SYSTEMS 



UNION MUTUAL LIFE INSURANCE COMPANY 
OP PORTLAND, MAINE. 



JOHN E. DeWITT, President. 



Commenced Business iS^g. Mutual. 



The following is its official record from 1849 to 1890 inclusive, as 
shown by Reports from the Insurance Departments, from year to 
year : 





Assets 


Insurance in Force 


New Insurance 


Year. 


December 31. 


December 31. 


During Year. 


1872 


$6,723,696 


$39,814,365 


$11,227,490 


1873 


7,717,851 


42,904,755 


10,935,045 


1874 


8,796,699 


49,207,370 


14,517,543 


1875 


9,158634 


46,740,375 


12,181,017 


1876 


8,099,634 


40,979,204 


8,266,345 


1877 


7,836,890 


34,381,818 


4,789,417 


1878 


7,035,603 


28,915,136 


4,100,943 


1879 


6,860,983 


26,697,370 


3,039,356 


1880 


6,620,833 


25,036,862 


2,767,681 


1881 


6,247,333 


24,083,550 


2,825,499 


1882 


6,260,443 


24,621,565 


4,045,098 


1883 


6,229,684 


24,527,958 


3,806,819 


1884 


6,311,402 


24,282,746 


3,889,506 


1885 


6,109,619 


24,567,437 


4,232,849 


1886 


6,119,915 


25,185,946 


5,218,800 


1887 


6,014,523 


25,794,196 


4,933,215 


1888 


6,002,194 


26,395,600 


5,020,107 


1889 


6,157,343 


27,204,606 


4,879,787 


1890 


6,203,768 


28,218,754 


5,357,519 



OE LIFE INSURANCE. 



12' 



UNITED STATES LIFE INSURANCE COMPANY 
OP NEW YORK. 



GEORGE H. BURFORD, President. 



Commenced Business 1850. Paid-up Capital, $440,000. 

The following is its official record from 1850 to 1890 inclusive, as 
shown by Reports from the Insurance Departments, from year to 
year : 





Assets 


Insurance in Force 


New Insurance 


Year. 


December 31. 


December 31. 


During Year. 


1872 


$3,900,461 


$22,929,762 


$9,242,107 


1873 


4,179,902 


23,419,762 


6,667,145 


1874 


4,381,266 


23,542,392 


5,791,470 


1875 


4,617,983 


22,848.081 


5,052,880 


1876 


4,803,332 


20,835,662 


4,407,572 


1877 


4,799,789 


21,641,192 


8,865,101 


1878 


4,838,356 


18 432,608 


4,086,601 


1879 


4,940,811 


17,362,693 


3,416,843 


1880 


5,107,950 


16,856,766 


3,589,474 


1881 


4,994,670 


16,671,328 


3,025,445 


1882 


5,087,513 


17,167,105 


2,947,761 


1883 


5,226,429 


19,193,579 


5,441,054 


1884 


- 5,154,412 


19,769,864 


4,125,975 


1885 


5,425,264 


20,153,853 


4,059,260 


1886 


5,586,630 


21,109,155 


4,165,175 


1887 


5,681,494 


23,471,829 


5,641,120 


1888 


5,914,843 


25,752,267 


6,575,176 


1889 


6,266,338 


30,431,272 


9,523,581 


1890 


6,469,483 


36,322,163 


12,429,917 



128 



THE THREE SYSTEMS 



THE WASHINGTON LIFE INSURANCE COMPANY 
OF NEW YORK. 



WILLIAM. A. BREWER, Jr., President. 



Co??imenced Business i860. Paid-up Capital, $125,000. 



The following is its official record from i860 to 1890 inclusive, as 
shown by Reports from the Insurance Departments, from year to 
year : 





Assets 


Insurance in Force 


New Insurance 


Year. 


December 31. 


December 31. 


During Year. 


1872 


$3,411,203 


$25,950,890 


$6,254,707 


1873 


3,886,453 


26,812,062 


5,827,269 


1874 


4,379,425 


25,021,417 


3,936,740 


1875 


4,812,710 


25,429,555 


3,712,225 


1876 


5,173,279 


24,346,506 


2,866,235 


1877 


5,353,251 


23,127,543 


3,398,432 


1878 


5,487,809 


21,215,796 


2,607,008 


1879 


5,591,889 


21,447,274 


3,164,290 


1880 


5,815.981 


23,451,270 


4,446,072 


1881 


6,191,887 


25,928,150 


5,072,179 


1882 


6,534,465 


29,374,019 


6,891,831 


1883 


6,978,607 


31,994,723 


6,389,470 


1884 


7,273,660 


33,334,672 


6,898,500 


1885 


7,771,785 


33.956,324 


5,348,665 


1886 


8,231,130 


36,574,831 


7,695,162 


1887 


8,807,479 


39,506,527 


8,288,276 


1888 


9,401,336 


42,768,034 


9,551,611 


1889 


10,019,268 


46,390,324 


10,663,767 


1890 


10,741,899 


48,397,326 


10,638,473 



THE 



Natural Premium System. 



ITS DISTINGUISHING CHARACTERISTICS 



AND 



PLANS OF COMPANIES. 



130 THE THREE SYSTEMS 



CHAPTER X. 



The Natural Premium System. — Its Distinguishing Char- 
acteristics.— Requisites for Soundness and Permanen- 
cy. — A Level Premium Separated into its Elements. — 
A Natural Premium Separated Into Its Elements.— 
The Two Compared.— Table A, Showing Reserve and 
Amount at Risk on a Level Premium Policy of $10,000, 
age 40, for 27 Years. — Remarks on the Same.— Table B, 
Showing Reserve and Amount at Risk on a Natural 
Premium Policy of $10,000, age 40, for 27 Years. — 
Remarks on the Same. — Table C, Showing the Net and 
Gross Natural Premiums for $1,000, ages, 20 to 99.— 
Remarks on the Same. — Uniform Percentum Loading 
Discussed. — Sheppard Homans* Plan. — Kansas Mutual 
Life Association. 



II. THE NATURAL PREMIUM SYSTEM. 
Distinguishing Characteristics: 

1. The premium is required to be paid in advance. 

2. The contract between the company and the in- 

sured is call3d a policy. 

3. The policy always designates a definite sum to 

be paid by the company to the beneficiary 
or beneficiaries named therein, and the insur- 
ance is for one year, only, or a fractional part 
thereof— three or six months— renewable from 
time to time at the option of the insured, 
without medical examination. 

4. The premium is a iC progressive premium;*' that is, 

it is larger each successive year than the last 
preceding one. But the increase in a well 
managed company is liable to be impeded, 
somewhat, so that each of the annual pay- 
ments, during the first five or ten years, in a 
Mutual Company, may possibly be kept down 
by dividends to a level, or nearly so, with 
that of the third, or even the second year. 



OF LIFE INSURANCE. 131 

Requisites for Soundness and Permanency. 

a.— The premium must be based on safe assumptions 
of future mortality, interest and expenses. 

&.— There must be in hand from the first to the end 
of every policy year, the reserve provided by 
law. 

To illustrate,— suppose that the insured is 40 years old at 
the beginning of a policy year ; that the policy is for $1,000, 
and that the premium is based on the Actuaries' Table of 
Mortality, and 4 per cent, interest. (See Table No. 16, col. 6). 
The net premium at 40 is $9.96, and it is also the required 
reserve. Bear in mind that this is the reserve at the beginning 
of the year ; but it gradually diminishes until at the end of 
the year it is nothing ! At the beginning of the second year 
he is 41, and the net premium, — which is also the legal re- 
serve—, is now $10.20, which is also reduced to zero at the end of 
the year. At the beginning of the sixth year, at age 45, the 
reserve is $11.74, and nothing at the end of the year. At ages 
50, 55, 60, 65 and 70, the reserves are, respectively, $15.33, $20.83, 
$29.17, $42.39, and $62.44, at the beginning of each of the several 
years indicated, but no reserve is required at the terminations of 
these years. Generally, at the beginning of any policy year, 
the reserve required by law in The Natural Premium Sys- 
tem, is the net premium at the then age si but, at the end of any 
policy year, no matter how long the policy has been in force, no 
reserve is required. If any remains, at the end of the year, it 
shows that the mortality of the company during the year has 
been less than that indicated by the mortality table upon which 
its premiums are based, and it is placed to the credit of the sur- 
plus fund. 

c— The premiums should be loaded sufficiently— see 
"loading," page 26— to provide for any possible 
mortality, in the future, in excess of that indi- 
cated by the mortality table upon which they 
are based. This surplus fund should be safely 
invested, and the policy contract should defi- 
nitely state how it will be invested. To every 
policy holder who has been insured a certain 
number of years, say ten to fifteen, such a pro- 
portional part of this special mortality fund as 
his premiums have contributed thereto, to- 
gether with interest earned thereon, should be 
available, annually thereafter, in payment of his 
premiums. Should death occur, or the policy 
lapse, or become forfeited, prior to the expira- 
tion of the stipulated period, it should be for- 
feited to the remaining members. 



132 THE THREE SYSTEMS 

d.— The necessary expenses of the company should 
be amply provided for by collecting" from every 
policy-holder— Quarterly, semi-annually or an- 
nually, in advance— a uniform fixed amount 
for each $1,000 of insurance regardless of age. 
A uniform per centum loading of the net pre- 
mium for expenses in this system of insurance 
is inequitable. 

e.— Good management. 

Every life premium, under The Level Premium System, 
is composed of three elements, as follows. — (1) The Reserve 
Element ; (2) The Mortality Element ; (3) The Expense 
Element. Table No. 1 gives these elements of an Ordinary 
Life Premium, for $1,000 of insurance, at every age from 10 
to 99, inclusive, according to The Actuaries' Table of Mor- 
tality and 4 per cent, interest. These elements are thoroughly 
discussed in previous pages, commencing at page 61. 

Every life premium under The Natural Premium System 
is composed of two elements. — (1) The Mortality Element — 
which is also the reserve — (2). The Expense Element. Table 
No. \% gives these elements of a natural premium, for $1,000 of 
insurance, at every age from 10 to 99, inclusive, according to 
The Actuaries' Table of Mortality, and 4 per cent, interest. 

By comparing col. (1), Table No. 1V^, with col. (6), Table No. 
16, they will be found to be the same. That is to say, in The 
Natural Premium System, the expressions, legal reserve, 
natural net premium, and mortality element, when used with refer- 
ence to the same gross premium, mean precisely the same. To 
illustrate. — The gross natural premium to insure $1,000 for one 
year, at age 30, is $10.80, reference being had to col. (3), Table 
No. \%. This premium is composed of the following elements : 

1.— Mortality Element . . $ 8.10 

2.— Expense Element 2.70 

Gross Premium $10.80 

The mortality element ($8.10), at the beginning of the year, is 
also the legal reserve, and the net premium to insure $1,000 for 
one year. The mortality element, the net premium, and the legal 
reserve are synonymous terms when applied to the same gross 
natural premium, at the beginning of the year, or fractional part 
thereof designed to be covered by the premium. 

To further illustrate the nature and office of the legal reserve 
in The Natural Premium System, and in what respect it 
differs from the legal reserve in The Level Premium System, 
let it be assumed that a person, at age 40, insures, the same day, 
for $10,000 under each system. He has two policies— one is for 
$10,000 on The Level Premium Plan ; the other is for $10,000 
on The Natural Premium Plan. He pays, in advance, to the 



OF LIFE nrSUBAHCE. 



133 



Level Premium company, $315.70, or thereabouts, and to the 

Natural Premium company, say, S132.80. 

The Level Premium is made up of the following elements : 

(1.J.-J The Reserve Element $138.60 

(2. ).— The Mortality Element 98.20 

(3.)-— The Expense Element 78.90 

Gross Level Premium $315.70 

The Natural Premium is made up of the following ele- 
ments : 

(1.).— The Legal Reserve 1 



or 



^Element. ... $ 99.60 



The Mortality 

or 
The Net Annual Premium J 

(2.).— The Expense Element 33.20 



Gross Natural Premium $132.80 

The "Expectation of life," at 40, is a fraction over 27 years ; 
call it 27.. even. The two following tables,. A and B, show very 
clearly the difference between the legal reserve of a Level Pre- 
mium and the legal reserve of a Natural Premium, both as 
to the offices they perform, and the results as shown in the 
amounts of insurance in force from year to year respectively. 

TABLE A. 
Showing the legal reserve, and the amount of Insur- 
ance at risk, at the beginning 1 , and. also, at the 
end of each year, on a Ten Thousand Dollar Or- 
dinary Life Policy issued at Age 40, under the 
Level Premium System. 





Beginning of each Policy Vear. 


End of each 


Policy Vear. 


Age 


Legal Reserve, 


Amount of In- 


Legal Reserve, 


Amount of In- 




Actuaries' 


surance, 


Actuaries' 


surance, 


• 


4 per cent. 


at risk. 


4 per cent. 


at risk. 




Col. i. 


Col. 2. 


Col 3. 


Col. 4- 


40 


8236.80 


89.763.20 


$144.12 


89.855.88 


41 


380.92 


9.619.08 


293.13 


9,706.87 


42 


529.93 


9.470.07 


447. 02 


9.552.98 


43 


683.82 


9.316.18 


605.47 


9,394.55 


44 


842 . 25 


9.157. 75 


767.93 


9.232.07 


45 


1.004 73 


8.995.27 


934.17 


9.065.83 


46 


1,170.97 


8.829.03 


1,103.57 


8 896.43 


47 


1,340.37 


8,659.63 


1.276.04 


8.723.96 


48 


1.512.84 


8,487.16 


1.451.38 


8,548.62 


49 


1,688.18 


8.311.82 


1.629.67 


8,370.33 


50 


1,866.47 


8,133.53 


1.810.60 


8,189.40 


51 


2,047.40 


7.952.60 


1.993.98 


8,006.02 


52 


2.230.78 


7.769.22 


2.179.61 


7,820.39 


53 


2.416.41 


7.583.59 


2.367.31 


7.632.69 


54 


2.604.11 


7,395.89 


2.557.01 


7.442.89 


00 


2.793.81 


7,206.19 


2,748.48 


7.251.52 


56 


2,985.28 


7,014.72 


2,941.44 


7,058.56 



134 



THE THREE SYSTEMS 



TABLE A.— Continued. 





Beginning of each Policy Year. 


End of each 


Policy Year. 


Age. 


Legal Reserve, 


Amount of In- 


Legal Reserve, 


Amount of In- 




Actuaries' 


surance, 


Actuaries' 


surance, 




4 per cent. 


at risk. 


4 per cent. 


at risk. 




Col. i. 


Col. 2. 


Col. 3. 


Col. 4. 


57 


3,178 24 


6,821.76 


3,135 93 


6,864.07 


58 


3,372.73 


6,627.27 


3,331.67 


6,668.33 


59 


3,568.47 


6,431.53 


3.528.39 


6,471.61 


60 


3,765.19 


6,234.81 


3,725.41 


6,274.59 


61 


3,962.21 


6,037.79 


3,922.48 


6,077.52 


62 


4,159.28 


5,840.72 


4,119.10 


5,880.90 


63 


4,355.90 


5,644.10 


4,314.98 


5,685.02 


64 


4,551.78 


5,448.22 


4,509.67 


5,490.33 


65 


4,746.47 


5,253.53 


4,702.89 


5,297.11 


66 


4,939.69 


5,060.31 


4,894.04 


5,105.96 


67 


5,130.84 


4,869.16 


5,082.95 


4,917.05 



Note 1.— The legal reserve, at the beginning of the first policy 
year, after payment of first annual premium, is $236.80, which is 
also the net annual premium— see Col. (1) above. The amount 
of insurance, at risk, at this time, see Col. (2), is the face of ihe 
policy, $10,000, less the legal reserve, $236.80, or $9,763.20! The 
legal reserve at the end of the first policy year, is $144.12, see 
Col. (3), and the amount of insurance, at risk, at this time, is the 
face value of the policy, $10,000, less the legal reserve, $144.12, 
or $9,855.88. The legal reserve, at the beginniny of the second 
policy year, age 41, is the legal reserve at the end of the last pre- 
ceding year, $144.12, added to the net annual premium, at 40, 
$236.80, or $380.92, The amount at risk, at the beginning of the 
second policy year, is the face value of the policy, $10,000, less 
the legal reserve, $380.92, or $9,619.08. The legal reserve at the 
end of the second year is $293. 13, and the amount of insurance, 
at risk, is the face value of the policy, less the legal reserve, or 
$9,706.87; and so on. 

Note 2 . — It will be noticed that the legal reserve at the begin- 
ning of any policy year is larger than at the end of the same 
year; compare Col. (1) with Col. (3). This is owing to the fact 
that the legal reserve at the beginning of every year is made up 
of the legal reserve at the end of the last preceding year increased 
by the net annual premium, which latter contains the mortality ele- 
ment used in payment of current death losses, during the year. 

Note 3. — If the insured were to die, immediately after the 
payment of his first annual premium, the company would pay 
$10,000. This $10,000 would be raised from two sources, (1) the 
legal reserve— $236.80— and (2) $9,763.20 from the mortality ele- 
ments of all the premiums of surviving policy-holders. In other 
words, the insured, liimself, would pay $236.80 of his own policy 
If the insured were to die at the end of the first policy year, be^ 
fore paying his second annual premium, he would contribute 



OF LIFE INSURANCE. 135 

$144.12 toward the payment of his own policy, and the balance, 
$9,855.88, would come from the mortality elements of the sur- 
viving policy-holders' premiums. By looking along down 
Col. (1), from age 40 to 67, inclusive, it will be seen how much 
the insured would contribute to the payment of his own policy, 
if death were to occur at the beginning of any policy year; and, 
by examining the amounts in Col. (8), it may be seen what would 
be contributed, by a policy-holder, insured for $10,000, at age 40, 
toward the payment of his own death claim, should death 
occur at the end of any policy year named. 

Note 4. — As has been said in preceding pages, over and over 
again, the legal reserve under the Level Premium Sys- 
tem means accumulation ! In the above example, the legal 
reserve at the end of the first policy year, is $144.12; at the end of 
the fifth policy year, it is $767.93; at the end of the tenth policy 
year, age 49, it is $1,629.67, and so on, through the entire 27 
3'ears of the policy-holders' expectancy— and as much longer as 
the policy is kept in force — continually increasing. When the 
insured attains the age of 67, having lived out the full average 
of life, and paid his full share of death losses and expenses thus 
far, the company still has in its possession $5,082.95, in the 
legal reserve, not one single penny of which can ever be used, 
lawfully, in payment of the current death losses or expenses. The 
policy-holder, under this assumed example, although the policy is 
$10,000, and it is spoken of as being $10,000 of insurance, is 
never insured for $10,000! At the end of the first year his 
insurance is the amount at risk, or $9,855.88, and this is 
the largest amount of insurance he can ever have under this 
policy contract, unless dividends be used in purchase of ad- 
ditions to the policy. At the end of 27 years he has only 
$4,917.05 of insurance. If he were to live and keep his policy in 
force 33 years longer, until the age of 100, the legal reserve would 
then just equal the face value of the policy, and he would have 
not one penny of insurance I 

Note 5. — It should be constantly kept in mind, when looking 
over the above table, that the maximum amount that the insured 
can ever be called upon to pay, in any one year, is the gross 
annual premium named in the contract, which, in this as- 
sumed case, is $315.70. It may be less, but it can never be more. 
If the company's mortality be less than that indicated by The 
Actuaries' Table of Mortality, there will be a dividend that 
can be used in reduction of this premium. If the Company realize 
more than 4 per cent, interest on the reserves in Col. (3), there 
will be a dividend from that source . If the expense element be 
not all used from year to year, a dividend will arise from that 
source. Chapter VI. explains, in detail, the principle sources of 
dividends under The Level Premium System. 

It should also be borne in mind, in this connection, that every 



136 



THE THREE SYSTEMS 



policy-holder under The Level Premium System pays his 
share of the death losses, in proportion to the amount of risk the 
company is carrying on him. In the example assumed the 
amount of insurance at risk, continually diminishes as the amount 
of legal reserve increases. 

Note 6. — At age 40, the actual cost to the company, accord- 
ing to The Actuaries' Table of Mortality and 4 Per Cent. 
Interest — see Table No. 16 — to carry $10,000 of insurance, one 
year, is $99.60; at age 67, it is $494.90, or nearly five times as 
much as at 40 ! Were no reserve kept in hand to reduce the 
amount of insurance at risk, under The Level Premium System, 
the annual rate of premiums would necessarily increase. 

TABLE B. 

Showing' the legal reserve, and the amount of Insur- 
ance, at risk, at the beginning, and, also, at the 
end of each year, on a Ten Thousand Dollar Life 
Policy issued at Age 40, under the Natural Pre- 
mium System. 





Beginning of each Policy Year. 


End of each Policy Year. 




Legal Reserve, 


Amount of In- 


Legal Reserve, 


Amount of 




Actuaries' 


surance 


Actuaries' 


Insurance 


Age. 


4 per cent. 


at risk. 


4 per cent. 


at risk. 




Col. i. 


Col. 2. 


Col. 3. 


Col. 4. 


40 


$99.60 


$9,900.40 


Nothing. 


$10,000 


41 


102.00 


9,898.00 


Nothing. 


10,000 


42 


104.80 


8,955.20 


Nothing. 


10,000 


43 


108.20 


9,891.80 


Nothing. 


10,000 


44 


112.50 


9,887.50 


Nothing. 


10,000 


45 


117.40 


9 882.60 


Nothing, 


10,000 


46 


123.50 


9,876.50 


Nothing. 


10,000 


47 


130.00 


9,870.00 


Nothing. 


10,000 


48 


137.10 


9,862.90 


Nothing. 


10,000 


49 


144.80 


9,855.20 


Nothing. 


10,000 


50 


153.30 


9,846.70 


Nothing. 


10,000 


51 


162.50 


9,837.50 


Nothing. 


10,000 


52 


172.60 


9,827.40 


Nothing. 


10,000 


53 


183.60 


9,816.40 


Nothing. 


10,000 


54 


195.30 


9,804.70 


Nothing. 


10,000 


55 


208.30 


9,791.70 


Nothing. 


10,000 


56 


222.40 


9,777.60 


Nothing. 


10,000 


57 


237.30 


9.762.70 


Nothing. 


10,000 


58 


253.70 


9,746.30 


Nothing. 


10,000 


59 


271.60 


9,728.40 


Nothing. 


10,000 


60 


291.70 


9,708 30 


Nothing. 


10,000 


61 


313.60 


9,686.40 


Nothing. 


10,000 


62 


337. 7U 


9,662.30 


Nothing. 


10,000 


63 


363.80 


9,636.20 


Nothing, 


10,000 


64 


392.60 


9,607.40 


Nothing. 


10,000 


65 


423.90 


9,576.10 


Nothing. 


10,000 


66 


457.80 


9,542.20 


Nothing. 


10,000 


67 


494.90 


9,505.10 


Nothing. 


10,000 



Note 1. — The legal reserve, at the beginning of the first policy 
year, as shown in Col. (1), is 99.60, and the amount of insurance 



OF LIFE INSURANCE. 137 

is $9,900.40. At the end of the year, the legal reserve is nothing, 
and the amount of insurance at risk is $10,000. The legal reserve 
at the beginning of each policy year, from age 40 to age 67, is 
from $99.60 at the former age to $494.90 at the latter age; but, at 
the end of each year, no legal reserve is required. The legal re- 
serve at the beginning of any policy year is used, gradually, in 
payment of current death losses, until, at the end of the same 
year, there is nothing remaining. 

The Net Premiums, above, are obtained by mathematical 
calculations; but the loading of these net premiums to obtain the 
corresponding Gross Premiums is entirely arbitrary. The 
loading of course is for expenses, and every company has its own 
peculiar notions with reference to it. 

I. — Column (5), Table No. 16 contains all the Net 
Annual Level Premiums, according to the Actuaries 
Table of Mortality and 4 Per Cent. Interest, to insure 
$1,000 for the ichole of life, at Ages from 10 to 99, in- 
clusive. By loading these Net Rates, say 33% per cent., 
we obtain Col. (4), Table No. 1, which contains the Gross 
Annual Level Premiums for insuring the same amounts 

AT THE SAME AGES, FOR THE SAME TIME. 

II.— Column (6), Table No. 16, contains all the Net 
Annual Natural Premiums, according to the Actuaries' 
Table of Mortality and 4 Per Cent. Interest, to insure 
$1,000 for one year, at Ages from 10 to 99, inclusive . By 
Loading these Net Rates, say 33% per cent., we obtain 
Col. (3), Table No. 1%, which contains the Gross Annual 
Natural Premiums for Insuring the same amounts, at 

THE SAME AGES, FOR THE SAME TIME. 

III.— Column (5), Table No. 17, contains all the Net 
Annual Level Premiums, according to the American Expe- 
rience Table of Mortality and 4 Per Cent. Interest, to 
insure $1,000 for the whole of Life, at Ages from 10 to 95, 
inclusive. By Loading these Net Rates, say 33% per cent., 
we obtain the Gross Annual Level Premiums for in- 
suring THE SAME AMOUNTS, AT THE SAME AGES, FOR THE SAME 
TIME. 

IV.— Column (6), Table No. 17, contains all the Net 
Annual Natural Premiums, according to the American 
Experience Table of Mortality and 4 Per Cent. Interest, 
to insure $1,000 for one year, at ages from 10 to 95, inclu- 
sive. By loading these Net Rates, say 33% Per cent., we 
obtain the Gross Annual Natural Premiums for insur- 
ing THE SAME AMOUNT, AT THE SAME AGES, FOR THE SAME 
TIME. 



138 



THE THREE SYSTEMS 

TABLE O. 



Showing the Net and Gross Natural Premiums, Actua 
ries' 4 Per Cent.; also the Net and Gross Natural 
Premiums, American 4 Per Cent., to Insure $1,000 for One 
Year. 





Actuaries' 


4. Per Cent. 


American 4 


Per Cent. 


Age. 


Net Natural Pre- 


Gross Natural Pre- 


Net Natural Pre- 


Gross Natural Pre- 




mium to insure 


mium to insure 


mium tc insure 


mium to insure 




$i,ooo, one year. 


$i,ooo, one year. 


$1,000. one year. 


$1,000, one year. 




Col. i. 


Col. 2. 


Col. 3. 


Col. 4. 


20 


$7.01 


$9.35 


$7.50 


$10.00 


21 


7.09 


9.45 


7.55 


10.07 


22 


7.18 


9.57 


7.60 


10.13 


23 


7.27 


9.69 


7.65 


10.20 


24 


7.37 


9.83 


7.70 


10 27 


25 


7.47 


9.96 


7.75 


10.33 


26 


7.58 


10.11 


7.82 


10.43 


27 


7.70 


10.27 


7.88 


10.51 


28 


7.83 


10.44 


7.95 


10.60 


29 


7.96 


10.61 


8.02 


10 69 


30 


8.10 


10.80 


8.10 


10.80 


31 


8.25 


11.00 


8.18 


10.91 


32 


8.41 


11.21 


8.28 


11.04 


33 


8.58 


11.44 


8.38 


11.17 


34 


8.75 


11.67 


8.49 


11.32 


35 


8.93 


11.91 


8.60 


11.47 


36 


9.12 


12.16 


8.74 


11.65 


37 


9.31 


12.41 


8.88 


11 84 


38 


9.53 


12.71 


9.05 


12.07 


39 


9.74 


12.99 


9.22 


12.29 


40 


9.96 


13.28 


9.42 


12.56 


41 


10.20 


13 60 


9.62 


12.83 


42 


10.48 


13.97 


9.86 


13.15 


43 


10.82 


14.43 


10.11 


13.48 


44 


11.25 


15.00 


10.41 


13.88 


45 


11.74 


15.65 


10.73 


14.31 


46 


12.35 


16.47 


11.12 


14.83 


47 


13.00 


17.33 


11.54 


15.39 


48 


13.71 


18.28 


12.03 


16.04 


49 


14.48 


19.31 


12.60 


16.80 


50 


15.33 


20.44 


13.25 


17.67 


51 


16.25 


21.67 


13.98 


18.64 


52 


17.26 


23.01 


14.80 


19.73 


53 


18.36 


24.48 


15.71 


20.95 


54 


19.53 


26.04 


1673 


22.31 


55 


20.83 


27.77 


17.86 


23.81 


56 


22.24 


29.65 


19.12 


25.49 


57 


23.73 


31.64 


20.52 


27.36 


58 


25.37 


33.83 


22.05 


29.40 


59 


27.16 


36.21 


23.77 


31.69 


60 


29.17 


38.89 


25.67 


34.23 


61 


31.36 


41.81 


27.77 


37.03 


62 


33.77 


45.03 


30.09 


40.12 


63 


36.38 


48.51 


32.64 


43.52 


64 


39.26 


52.35 


35.46 


47.28 



OF LIFE INSURANCE. 



139 



TABLE C— Continued. 





Actuaries' 


4 Per Cent. 


American 


4 Per Cent. 


Age. 


Net Natural Pre- 


Gross Natural Pre- 


Net Natural Pre- 


Gross Natural Pre- 




mium to insure 


mium to insure 


mium to insure 


mium to insure 




$i.ooo, one year. 


$r,ooo, one year. 


$i,ooo, one year. 


$i,ooo, one year. 




Col. i. 


Col. 2. 


Col. 3 . 


col. 4. 


65 


$42.39 


$56.52 


$38.59 


$51.45 


66 


45.78 


61.04 


42.03 


56.04 


67 


49.49 


65.98 


45.82 


61.09 


68 


53.49 


71.32 


50.00 


66.67 


69 


57.78 


77.04 


54.58 


72.77 


70 


62.44 


83.25 


59.61 


79.48 


71 


67.46 


89.95 


65.07 


86.76 


72- 


72.89 


97.18 


70.81 


94.41 


73 


78.73 


104.97 


77.09 


102.79 


74 


85.07 


11343 


83.68 


111.57 


75 


91.89 


122.52 


90.74 


120.99 


76 


99.21 


132.28 


98.38 


131.17 


77 


107.18 r 


142.91 


106.79 


142.39 


78 


115.81 


154.41 


116.18 


154.91 


79 


125.06 


166.75 


126.67 


168.83 


80 


135.01 


180.01 


138.91 


185.21 


81 


145.61 


192.01 


152.89 


203.85 


82 


156.92 


209.23 


167.59 


223.45 


83 


169.15 


225.53 


184.19 


245.59 


84 


182.38 


243.17 


203.23 


270.97 


85 


197.21 


262.95 


226.49 


301.99 


86 


213.92 


285.23 


255.46 


340.61 


87 


232.92 


310.56 


291.37 


388.49 


88 


255.07 


340.09 


333.36 


444.48 


89 


281.14 


374.85 


380.64 


507.52 


90 


311.28 


415.04 


437.06 


582.75 


91 


347.10 


462.80 


511.98 


682.64 


92 


389.68 


519.57 


609.86 


813.15 


93 


439.64 


586.19 


705.94 


941.25 


94 


496.45 


661.93 


824.18 


1,098.91 


95 


561.80 


749.07 


961.54 


1,282.05 


96 


623.70 


831.60 






97 


665.68 


887.57 






98' 


721.15 


961.53 






99 


961.54 


1,282.05 







Note 1.— The Gross Premiums in Table C, (2) and (4), are the 
net premiums, (1) and (3), loaded 33% per cent. This uniform 
per centum loading is not equitable, and Table C. is given, princi- 
pally, to illustrate that it is not, in this kind of insurance. By 
subtracting (1) from (2); or, (3) from (4), at any age in the table, 
the loading is ascertained, and this is the contribution, of every 
policy-holder insured for $1,000 at the selected age, toward the 
payment of the company's expenses for one year. By comparing 
columns (3) and (4), it will be seen that for each $1,000 of insur- 
ance, the expense charge,— losing — , is as follows : At age 
twenty, $2.50 ; at age thirty, $2.70 ; at age forty, $3.14 ; at age 
fifty* $4.42 ; at age sixty, $8.56 ; at age sixty-five, $12.86 ; at age 
seventy, $19.87; at age seventy -five, $30.25; at age eighty, $46.30; 



140 THE THREE SYSTEMS 

at age eighty -five, $75.50, and, similarly, with reference to inter* 
mediate and still older ages. In the Natural Premium System, 
the premium is fixed for only one year. The next year, it is 
higher ; and the next, still higher, and so on. It is rather difficult 
to understand why a policy-holder at age seventy, insured for 
$1,000, should be required to pay $19.87 as his proportion of the 
expenses for one year, while another policy-holder insured in the 
same company for the same amount, at age forty, is required to 
pay only $3. 14 as his contribution to the expense fund for the 
same year. This inequity is the result of a uniform per centum 
loading on an annually increasing net premium. 

One of our Level Premium Companies that has issued some 
policies on The Natural Premium Plan, calling them 
"Yearly Renewable Policies/' charges, the first year, very 
nearly the Level Premium rate, after which the rate drops to the 
natural net premium loaded about seventy -five per cent., and — in- 
creases annually thereafter, during the balance of life. For in- 
stance, the gross rate at age 25, for $1,000 of insurance, the first 
year, is $18.84 ; the second year, it is $13.54 ; the third year, age 
twenty -seven, it is $13.63 ; the tenth year, when the insured has 
attained the age of thirty -four, it is $14.35 ; the fifteenth year, 
at age thirty -nine, it is $15.22 ; the twentieth year, age forty-four, 
it is $16.65 ; the twenty-sixth year, age fifty, it is $20.09 ; the 
thirty -first year, at age fifty -five, it is $25.70 ; the thirty-sixth year, 
age sixty, it is $35.34; the forty -first year, at age sixty-five, it is 
$51.63 ; and, the forty -sixth year, when at the age of seventy, it is 
$79.16 for each $1,000 of insurance, annually increasing, there- 
after, as the policy-holder's age increases. 

Assuming that the net rates of the company referred to are 
based on the American Experience Table of Mortality and 
4 per cent, interest, they are the same as those contained in 
col. (3) of our table C. The net rate, therefore, for $1,000 of in- 
surance at age 25, the first year, is $7.75, but the company 
charges for this first year, $18.84, which is the net premium 
loaded over 143 per cent. The second year the company charges 
$13.54. The net premium is $7.82. The net premium is therefore 
loaded more than 73 per cent, to produce the Gross Premium. 
At age fifty, the net rate is $13.25, and the company's gross rate is 
$20.09, which shows a loading of nearly 52 per cent. At age 
seventy, the net rate is $59.61, and the company's gross rate is 
$79.16, showing a loading of only about 33 per cent. The com- 
pany gives no rating after 70. From age 50 to 70, the loading va- 
ries from 52 to 33 per cent, of the net rates. It was probably 
discovered that a uniform per centum loading is not equitable 
and hence a remedy was attempted by grading the loading from 
ages 26 to 70, inclusive, from 73 to 33 per cent. This grading is 
an improvement but not a remedy. 

The gross rates of this company are non-participating ; that 



OF LIFE INSURANCE. 141 

is, a policy holder receives no dividends, and, therefore, there is 
no adjustment, from year to year, of over charges for mortality 
or expenses. 

Some ten or fifteen years ago there began to be manifested a 
pretty general demand for cheaper insurance. Men in our best 
business circles wanted life insurance jfar the productive period of 
life in addition to what they called 'permanent" insurance. To 
supply this demand assessment societies sprang into existence all 
over this country. They came like the locusts of Egypt. They 
were liberally patronized. 

For a few years the death rate was low and the assessments 
few. The membership believed, as they were ignorantly taught, 
that the death rate would never be much higher, if any, and 
henceforth life insurance was to be obtained at a reasonable 
price. These societies were organized, almost without excep- 
tion, by men ignorant of the fundamental principles of life in- 
surance. The results were what every intelligent insurance man 
predicted. But the demand for cheap, temporary insurance re- 
mained. 

About this time one of the most scientific insurance men in 
America, known and acknowledged as such both in this and foreign 
countries ; educated for the navy ; actuar) 7 for sixteen years of the 
largest life insurance company in the world ; author of the " Con- 
tribution System of Dividends," used by many of the level premium 
companies in America in the annual distribution of their surpluses, 
and author of the American Experience Table of Mortality ; a man 
familiar with the vital statistics of both hemispheres — this man finally 
directed his attention to the very general demand for cheap, scientific 
life insurance for the productive period of life. The intelligent 
reader has already recognized the character alluded to in the person 
of Sheppard Homans of New York city. 

From his familiarity with life insurance mathematics and vital 
'statistics Mr. Homans knew, from the start, that the demand for 
cheap temporary insurance must be supplied from the natural pre- 
miums. These must in some way be utilized in the solution of the 
problem. The first step in that direction was not altogether success- 
ful. The natural premiums were used, but he committed the error 
of adopting, substantially, the uniform per centum loading heretofore 
explained. He was on new ground — to him — with his brain full of 
level premium methods and usages, and it would have been remark- 
able had he not made some such mistake. His first system of 
natural premium insurance was the natural premium loaded about as 
he had been accustomed to load the net level premium, with no 
special reserve to fall back on in the event of excessive mortality, 
and to serve as a kind of cement with which to hold the membership 
together. With the system of loading adopted expenses were high, 
and, the legal reserve was all used in payment of death losses. 

In 1883 Mr. Homans revised his system with a view of remedying 



142 



THE THREE SYSTEMS 



its imperfections. How far he has succeeded the reader can judge 
from the following description of the new plan : 

THE PROVIDENT SAVINGS LIFE ASSURANCE 
SOCIETY OF NEW YORK. 

This Company commenced business August 10, 1875, having for 
its specialty Renewable Term Life Insurance, sometimes incorrectly 
described as the Natural Premium System. By this plan large 
accumulations, unavoidable under any system of level or unchange- 
able premiums, are rendered unnecessary. 

A copy of the Yearly Renewable Term Policy of the Provident 
Savings will be found on the opposite page : 

STIPULATIONS AND AGREEMENTS. 

Regarding Premiums and their Payment. 

This Policy does not go into effect until the first premium has been actually- 
paid during the lifetime and good health of the within-named insured. 

AU premiums are due at the office of the Society in the City of New York. 
For the convenience of policyholders they may be paid to an authorized agent of 
the Society, but only in exchange for a receipt signed by the President or Secre- 
tary, and countersigned by such agent. Failure to pay any premium or 
instalment thereof when due will thereupon terminate this Policy. Any unpaid 
quarterly or semi-annual instalment of the current year's premium, and any other 
indebtedness to the Society will be deducted in any settlement of this Policy. 

The Annual Premiums on this policy may be paid by instalments as 

hereinbefore stated on or before the days of , 

and , in each year. 

schedule of yearly renewable rates of premium required to renew 
each $1000 of insurance. 



For Age 
Actually 
Attained 



16-25 

26 

27 

28 

29 

30 

31 

32 

33 

34 

35 

36 

37 

38 

30 

40 

41 

42 



Annual 
Premium. 


Semi- 
Annual 
Instal- 
ment. 


Quar- 
terly In- 
stalment. 


For Age 
Actually 
Attained 


13.75 


7.15 


3.72 


43 


14.00 


7.28 


3.80 


44 


14.25 


7.41 


3.85 


45 


14.50 


7.54 


3.92 


46 


14.75 


7.67 


3.98 


47 


15.00 


7.80 


4.06 


48 


15.25 


7.94 


4.13 


49 


15.50 


8.06 


4.19 


50 


15.70 


8.16 


4.24 


51 


15 88 


8.26 


4.30 


52 


16.04 


8.34 


4.34 


53 


16.24 


8.44 


4.39 


54 


16.44 


8.55 


4.45 


55 


16.68 


8.67 


4.50 


56 


16.92 


8.80 


4.58 


57 


17.20 


8.94 


4.65 


58 


17.18 


9.09 


4.73 


59 


17.80 


9.26 


4.82 


60 





Semi- 


Annual 


Annual 


Premium. 


Instal- 




ment. 


18.16 


9.44 


18.60 


9.67 


19.04 


9.90 


19.60 


10.19 


20.20 


10.50 


20.88 


10.86 


2172 


11.30 


22.64 


11.77 


23.68 


12.31 


24.84 


12.92 


26.12 


13.58 


27.60 


14.35 


29 24 


15.00 


31.00 


16.12 


33.25 


17.30 


35.75 


18.60 


38.50 


20.02 


41.50 


21.58 



Quar- 
terly In- 
stalment. 



4.91 
5 03 
5 15 

5.30 
5.46 
5.65 

5.88 
6.12 
6.40 
6.72 
7 06 
7.47 
7.80 
8.38 
9.00 
9.67 
10.41 
11.22 



No policy is issued at an age higher than sixty years. Schedule rates on same 
basis as above, for renewal above that age, subject to reduction by dividends, will be 
furnished on request. 



OF LIFE INSURANCE. 



143 



^MOUf/ ; 




^F^gE^Taaaa^gf .t^&ss^ 



r 2 



(In i OriSidcrcLuOn of toe stipulations and ftgr24m.en.ls in the application herefor and 'ipon. tKe nejct page 6? this 
"Policy, all of which, are a part of this Contract; .and m consideration also of the payment of (!Lsrl/Zs<£s£^t ^rtt&ttC 
CU^cC sdi]t&j sr1\Sl&C .dollars and — ^W r E&1sClSS — — cents, being the premium hereon for t 
promises to gag, to " 



: year. 



JUcM*. 



or to n&i/ legal representatives or assigns, the 





ui£^2V_ 



^ss any indebtedness on account of this "Policy,) within Sixty ©ays after acceptance, at the. effice 
In the. C'tu of 3{ew ^ork, of satisfactory proofs of the death of 



of the Society 



of ^Y^otr £f<y\JC C/ 

or before the jJ^>C^c^pL, 



County of <^koO G/<r&%> 



' occur oa 



and State of 
(the insured under this "Policy) provided such death shall' 
z jctt^c^-c*^ day <& j}o*44Aj3yL>%^ — . ,s*l9.. 189*. 

^nd the said Society further agrees to ££ctte«J ami ;£xtcttcl tills* JuSttrattCe upon like conditions, without 

ITii».^i».il niJYflminn^nn "Snrinn «/>.->> e.urri>ce.\V9 UMUT «f thft lifa of the insured. 1 



^Hna tne sail pcciety turtner agrees to gvcnetu anil gsicua iai5 ^usuraucB upon, nive conaiuons, wnnou* 
medical reexamination, during each successive year of the life of the insured,, from date hereof, upon the payment, on 6t 
before the ^^c^-t^c^. 'day of jJs(2***^£L/Uj' «* e^* 1 such H 23 - 7 ". of ®* r i ntws ^ premiums, tn accordance 

with the schedule rates, less the dividends awarded hereon. 

(ln r \ji/7rLC£S U/K^reof^ the groutaeut £a»iwjs gifc ^sstirattcc ^octets of |6m %avk "has 

caused this "Policy to be signed by its President and Secretary, at its office in the City of New york, Oil this, the 
*«'»*;> .</6C/<yu<?C r day of i^t^^T^V *sH- SX, ar.e "thousand eight hundred and ninety &*££*>*. 



144 THE THREE SYSTEMS 

Regarding the Death Fund and the Guaranty Fund. 

After deducting the expense charge, which is limited to four dollars per annum 
on each thousand dollars insured, the Society agrees to divide the residue of each 
renewal premium received by it upon this policy as follows : 

Such amount as shall be required for this policy's share of death losses will be 
appropriated as a Death Fund to be used solely in settlement of death claims. 
The remainder thereof will be retained as a Guaranty Fund. The amounts so 
retained on account of this policy will be used towards offsetting any increase in 
the premium on this policy from year to year ; or, provided this policy, after five 
full years premiums have been paid, be terminated solely by non-payment of any 
stipulated premium when due, eighty per cent of any amounts so retained but not 
so used will be applied to extend this insurance ; or if application be made 
therefor while this policy is in full force and effect to purchase paid-up insurance. 

Regarding Agents. 
No agent is or will be authorized to make, alter or discharge this contract, or to 
waive any forfeiture thereof, or to extend this insurance, or to grant permits, or 
to receive for premiums anything except cash. 

Regarding Assignments and Proof of Interest. 

Assignments of this policy must be in writing and a duplicate thereof must be 
furnished the Society. Any claim arising under an assignment shall be subject to 
satisfactory proof of interest. 

It will be noticed that while by the terms of the policy contract 
the premiums advance each year as the insured grows older, yet the 
Society binds itself to apply the surplus or dividends towards 
offsetting such yearly increase. How long the premiums can thus be 
kept " level " depends upon the rates of mortality experienced in 
successive future years. It is estimated that if the mortality should 
not exceed eighty per cent of that by the American Experience 
Table (which is the rate in the best companies), no increase in the 
rate paid the first year will be necessary during the 4< expectation of 
life " for all ages at issue. If the mortality should exceed that rate, 
the premiums cannot be kept level for so long a time, but the insur- 
ance is furnished at the actual current cost without calling for invest- 
ment deposits in addition. 

No guaranty that the rates will not increase for any definite 
number of years can be given for the simple reason that the State 
laws would require in such case that a level premium reserve should 
be charged against the company. This would necessitate an increase 
of the premiums over those charged by the Provident Savings. 

The arguments advanced by the managers of the Provident Sav- 
ings in favor of its Renewable Term Policy are : 

Few persons need or desire the protection of life insurance 
beyond the age of seventy years. Insurance protection is most 
needed when the children are young and are being educated, rather 
than when they are educated and established in life. Moreover, the 
financial problem of life has generally been worked out at or previous 
to that age, and hence endowment or j*//*- protection is then more 
needed than insurance protection." Is it not better in life insurance, 
as in every other commercial transaction, to pay as you go, and get 



OF LIFE INSURANCE. 145 

what you pay for, rather than to pay, unnecessarily and in advance 
for account of insurance in the distant and uncertain future which 
you may not live to enjoy or, if living, which you may not then 
desire or be able to pay for ? Such unnecessary overpayments do not 
add to the security of life insurance, but rather lessen that security 
by adding the hazards of banking or custody of trust funds to the 
hazards of insurance proper. 

In addition to the yearly renewable the Provident Savings issues 
ten, fifteen and twenty-year Renewable Term Policies or up to the 
age of seventy years, upon which the premiums are guaranteed not 
to increase during the term selected. The premiums in these cases 
are slightly higher than upon the yearly renewable, for the reason 
that the necessary level-premium reserves must be provided. 

In order to meet the wants of those persons who desire to make 
provision for family or business in case of death, and also to make 
provision for themselves in old age — that is, endowment as well as 
life insurance — the Provident Savings issues what it calls Insurance 
Bonds. A copy of its " Twenty- Year Insurance Bond" will be found 
on the next page. 

STIPULATIONS AND AGREEMENTS UPON WHICH THIS INSUR 
ANCE BOND IS ISSUED. 

Regarding the Premium. 

The assured promises to pay to the Society, upon delivery of this Bond, a 
premium of Fifty-three Dollars and nine cents, and to pay a premium of like 
amount on or before the fifteenth day of in each year during the con- 

tinuance of this contract. All of said premiums are due at the office of the 
Society in the City of New York. They may, however, be paid to an authorized 
agent of the Society on or before the dates when due, but only in exchange for a 
receipt signed by the President or Secretary and countersigned by such agent. 
They are due annually, in advance, and if paid in semi-annual or quarterly instal- 
ments, any unpaid portions of the then current year's premium shall be deducted 
from the amount due upon death or surrender. 

Regarding Forfeiture. 

If any stipulation, condition or agreement contained in the application herefor 
shall be violated, then this Bond shall be null and void, and all payments made 
or accepted hereon shall be forfeited to the Society, except that the stipulated 
cash surrender value will be paid, provided written application be made therefor 
within sixty days of such violation. 

Regarding Surrender. 

After three full years' premiums have been received hereon the Society will pay 
for the legal surrender of ihis Bond while in force the stipulated cash surrender 
value, and, upon written request at the time of such surrender or at the maturity 
of this Bond, will issue upon the life of the within named insured a renewable 
term policy of insurance for One Thousand Dollars as a part of this contract, 
without medical re-examination. 

Regarding Lapse. 

If any stipulated premium hereon shall remain unpaid when due, then this 
Bond shall be null and void, and all payments made or accepted hereon shall be 
forfeited to the Society, except that, if such default shall occur after three full 
years' premiums have been received hereon, the full reserve will be applied in 
accordance with the Statutes of the State of New York to purchase extended or 
paid-up insurance, as has been elected in the application herefor, provided 
written request be made therefor within six months of such default. 



146 



THE THREE SYSTEMS 



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OF LIFE INSURANCE. 147 

Regarding Agents. 
No agent is or will be authorized to make, alter or discharge this contract, or to 
waive any forfeiture thereof, or to extend this insurance, or to grant permits, or 
to receive for premiums anything except cash. 

Regarding Loans. 
The Society will loan upon this Bond at six per cent interest per annum any 
desired amount within its stipulated cash surrender value, which loan and interest 
shall be deducted from the amount due in any settlement of this Bond. 
Regarding Assignments and Proof of Interest. 
Assignments of this Bond must be in writing, and a duplicate thereof must be 
furnished the Society. Any claim arising under an assignment shall be subject to 
satisfactory proof of interest. 

This Insurance Bond is a combination of insurance and investment, and 
possesses several important advantages over any other form of endowment insur- 
ance heretofore offered by any life insurance company, to wit : 

1. The guaranteed cash surrender value at the end of each year after the second 
is printed in the Bond contract. 

2. In case of death the cash surrender value is paid in addition to the full face 
of the Bond, thus giving a dividend of from thirty to ninety per cent of the total 
premiums paid, which is guaranteed — not estimated. 

3. At the end of twenty years the face of the Bond is payable as an endowment 
together with surplus. 

4. On surrender of the Bond or upon its maturity at the end of twenty years the 
insurance need not be terminated, as the Society agrees to issue a new renewable 
term policy upon the life of the insured, without medical re-examination, upon 
simple written request. 

5. The investment portion of each premium is kept separate from the insurance 
portion, and each is treated upon correct principles. 

The Bondholder knows exactly what to expect each year. Should he at any 

time need the money more than the investment he can withdraw the guaranteed 

surrender value without prejudice to the insurance, which may be continued for 

the remainder of life if he so desires. The contingencies of life and death and of 

altered pecuniary or domestic circumstances are fully covered. 

SHEPPARD HOMANS, 

President. 
Wm, E. Stevens, 

Secretary. 
Form 256. 

Similar Insurance Bonds are issued for ten and fifteen years, and 
the same principles are applied to Limited Payment Whole Life 
Policies. That is to say, the investment portion is paid in addition 
to the sum insured in case of death, or the investment portion may 
be withdrawn without prejudice to the insurance, as that may be con- 
tinued under the less expensive renewable term plan. 



148 THE THREE SYSTEMS 

THE KANSAS MUTUAL LIFE ASSOCIATION 
OP TOPEKA, KAN. 

J. P. Davis, President. John E. Moon, Secretary. 

The Kansas Mutual Life Association was organized under the laws 
of the State of Kansas, in January, 1882, at Hiawatha, Kan., where 
its home office remained until the close of 1891. 

While located at this town the Association made a steady growth 
and became recognized as a safe and reliable institution, destined to 
take high rank among life companies. Six years after its organization 
it took the lead of all other life companies in amount ot business done 
in Kansas, thus showing the high place it had attained in the estima- 
tion of the people in its own State, where its management, methods 
and character were well known. But as time went on the magnitude 
of its growing business demanded a more central location of the home 
office, and Topeka was selected as the most desirable place in the 
West for the establishment and up-building of a great life company. 

Its premium rates are based upon the Actuaries' Table of Mortality 
and four per cent interest, a basis both scientific and conservative, 
acknowledged to be so by the highest life insurance authorities of 
America. 

This Association has deposited with the treasurer of the State of 
Kansas $100,000 for the benefit and protection of its policyholders, 
and is licensed to operate as a regular life insurance company, issuing 
all popular forms of life and endowment policies. 

However, it makes renewable term insurance its specialty, issuing 
policies renewable, without medical re-examination, at intervals of 
one, five, ten and twenty years, which share in the profits of the Asso- 
ciation at regular intervals. 

On the yearly renewable term policies the surplus is applied to keep 
the premiums uniform with that at age of entry, thus offsetting the 
natural increase of cost with advancing age. 

On five, ten and twenty year renewable term policies, the premium 
is a guaranteed level rate for periods of five, ten and twenty years 
respectively, and the surplus accumulations during the first five years 
are applied to reduce the premiums during the succeeding five years, 
and the accumulations during the second five years are applied to 
reduce the premiums during the third five years, and so on during 
the life of the insured. 

All policies on the renewable term plan, except yearly renewable 
policies, have a paid up value, after three full premiums have been 
paid, for such an amount as the entire reserve will purchase, used as 
a net single premium, which paid-up value is given either in paid-up 
insurance or extended insurance. 

These renewable term policies afford the insured the maximum of 
life insurance for the minimum of annual cost, and hence are very 
attractive, meeting the wants and suiting the circumstances of a large 



OF LIFE INSURANCE. 



140 



class of business and professional men. The following are the pre- 
mium rates for the various renewable term policies of this Association 
at age 35 years : Yearly renewable, $15.84 ; five year, $15.14 ; ten 
year, $15 79 ; twenty year, $18.13. 

The rates for other ages are correspondingly low. 

The Kansas Mutual Life issues limited payment life and endow- 
ment policies that are exceedingly liberal in every respect. They aie 
nom forfeitable after three complete annual premiums have been paid, 
the insured, in case of lapse, being entitled to paid-up insurance 
without any action upon his part ; and upon legal surrender of policy 
on the third or any subsequent anniversary of its ^'ssue, the insured is 
entitled to receive thereon in cash the amount stated in the Associa- 
tion's published table of cash surrender values. 

The following example illustrates the surrender values of a twenty 
payment life pol.cy for $10,000, issued at age 35 : 

Surrender Values. 



No. Years 

Premium 

Paid. 


Paid-up 
Insurance 


Cash 
Surrender. 


No. Years 

Premium 

Paid. 


Paid-up 
Insurance. 


Cash 
Surrender. 


3 


$1,290 


$469.30 


12 


$5,880 


$2,640.00 


4 


1,810 


674.40 


13 


6,370 


2,929.00 


5 


2,330 


887.80 


14 


6,860 


3,228.80 


6 


2,850 


1,109.90 


15 


7,350 


3,539.80 


7 


3,360 


1,341.20 


16 


7.830 


3,862.90 


8 


3,870 


1,581.90 


17 


8,320 


4,198.70 


9 


4,380 


1,832.10 


18 


8,810 


4,548.30 


10 


4,880 


2,091.80 


19 


9,310 


4,912.50 


11 


5,380 


2,361.10 


20 


10,000 


5,393.10 



The surrender values in the foregoing example are what would be 
given were the dividends to which the insured is entitled used to re- 
duce the annual premium. Were the dividends used to purchase 
additional insurance, these values would be correspondingly increased. 

All limited payment life and endowment policies issued by the 
Association participate in dividend profits annually after the third 
year from date of issue. These profits very greatly lessen the cost of 
insurance when applied to reduce the annual premiums ; otherwise 
they increase the amount of insurance and surrender values by hand- 
some sums. 

At the expiration of the period during which premiums are paid, 
the Association g -ants, on limited payment life and endowment poli- 
cies, options of settlement which are unsurpassed in liberality and 
attractiveness, embracing paid-up insurance, cash surrender and life 
annuity. 

Upon the death of the insured, while his policy is in force for its 
full face, his beneficiary or assign may elect either (1) to receive cash 
for the face of the policy and dividend additions ; or, (2) in lieu 
thereof, have paid-up insurance for the same amount and receive an 
annuity for life ; or (3) the whole may be received in any desirable 



150 THE THREE SYSTEMS 

number of equal annual instalments, improved by interest ; or (4) 
have the entire equity converted into an annuity, payable at the 
beginning of each year thereafter during the life of the beneficiary. 

The Association permits residence or travel in any part of the world 
except the Torrid Zone, and permits the following of all non-hazar- 
dous occupations. All restrictions as to residence, travel and occupa- 
tion (except military or naval service in time of war) are removed 
after two years from date of issue of policy. 

Policies are issued upon healthy lives in amounts from $1,000 to 
$10,000. 

The agreements made in the policy contracts are warranted by the 
rates adopted. The management adheres strictly to conservative 
methods and is doing a safe business, having an eye single to the wel- 
fare of its patrons and the perpetuity of the Association. The Asso- 
ciation has had a healthy growth and is undoubtedly a strong, reliable 
and representative company. 

The management of the Association, both with reference to busi- 
ness ability and also to fidelity and integrity, is, we believe, all that 
can be reasonably demanded by an intelligent patronage. 

Located in a section of country noted for its push and enterprise, 
it is safe to predict that as time goes on the Kansas Mutual Life 
Association will become known throughout the land as one of the 
solid and popular life companies of the United States. 

THE LIFE INDEMNITY AND INVESTMENT 
COMPANY, SIOUX CITY, IA. 

C. E. MABIE, President. 

Commenced business in 1881. 

This is a purely mutual company, operating under the regular life 
insurance laws of the State of Iowa. 

Much prominence has been given to the life insurance laws of 
Iowa (see Law, p. 154) on account of the restrictions which are thrown 
around a life insurance company operating under them. Under this 
law a regular life insurance company organized in the State of Iowa 
is required to deposit with the Insurance Department of the State, 
in trust for its policyholders, certain defined prime securities equal 
to the net cash value of all policies in force upon the books of the 
company. 

The company is located in Iowa, which is practically the centre of 
a region which throughout presents, year after year, a low rate of 
mortality. Taking Wisconsin, Minnesota, the Dakotas, Idaho, Mon- 
tana, Nebraska, Iowa and Illinois — the States commonly known as the 
Northwestern group — the recorded experience of twenty-seven Amer- 
ican life companies during an average of thirty years shows that the 
actual money lost by death in these States was only $81.50 for every 



OF LIFE INSURANCE. 151 

$100 expected by the mortality tables upon which the business was 
based. Omitting from the group Illinois, because of certain adverse 
conditions in the southern half of the State attaching to the Missis- 
sippi Valley, the other States of the group show the death experience 
to have been only $73. 50 actual loss out of $100 expected. 

The greater portion of the business of the Life Indemnity is drawn 
from these States. 

The first and chief effect of this favorable experience is the increase 
in surplus — an increase which reverts immediately to the policy- 
holders of the company, either in current dividends or in tontine ac- 
cumulations. 

On account of its location the company also enjoys superior advan- 
tages in procuring high rates of interest on its assets. From seven to 
eight per cent, average interest in the West, against four to five per 
cent, in the East, means a great deal to the policyholders. This in- 
creased interest earning means a direct increase in the profits to poli- 
cyholders. 

As is generally known, Eastern capital is constantly seeking invest- 
ment in the West because of the higher rates of interest obtainable in 
the West over those in the East. The same considerations should 
have due weight in life insurance investments, as the profits to poli- 
cyholders depend primarily upon the rate of interest earned by a com- 
pany on its invested assets. 

The company issues all approved forms of life and investment poli- 
cies and bonds. 

Its policies are incontestable after the second year, and all policies 
are non-forfeitable and contain cash surrender values. The following 
is a copy of the company's Twenty-payment Life Semi-tontine policy, 
a * a ge 35, for $10,000 : 

This policy of insurance witnesseth, That the Life Indemnity and Investment 
Company, in consideration of the stipulations and agreements in the application 
herefor and upon the next page of this policy, all of which are a part of this con- 
tract, and of the payment of the sum of three hundred and forty dollars and eighty 
cents at the office of the company in Sioux City, la., and of the payment of the 
same amount yearly thereafter, at the said office, on or before the eighth day of 
August in every year during the continuance of this policy, or until twenty full 
yearly premiums shall have been paid to said company, hereby promises to pay to 
the insured's executors, administrators or ar-signs the sum of ten thousand dollars 
(de ucting therefrom all indebtedness to the company on account of this policy, 
together with the balance of any year's premium remaining unpaid), within sixty 
days after receipt and acceptance, at the office of the said company, in Sioux City, 
la., of satisfactory proofs of the death of John Smith of Sioux City, county of 
Woodbury, State of Iowa (the insured under this policy). 

If any premium or any part thereof, or any note given therefor, shall not be 
paid on the day it falls due, then this policy shall become void, and all payments 
previously made shall remain the property of the company, subject to the com- 
pany's non-forfeiture provisions, as stated on the next page of this policy. 

This policy, after having been in force for two years, shall be incontestable, ex- 
cept for non-payment of premium ; subject, however, to the company's provisions 
as to military and naval service in time of war. 

In witness whereof, the Life Indemnity and Investment Company has, by its 



152 THE THREE SYSTEMS 

president and secretary, signed and delivered this contract in Sioux City, la., this 
eighth day of August, A. D. one thousand eight hundred and ninety-one. 

, Secretary. , President. 

Provisions, Stipulations and Agreements Referred to in this Policy, 
semi-tontine provisions. 

This policy is issued on the semi-tontine plan, particulars of which are as fol- 
lows : 

That the semi-tontine dividend period of this policy shall be completed on the 
eighth day of August, in the year nineteen hundred and eleven. 

That no dividend shall be allowed or paid on this policy, unless the person 
whose life is hereby insured shall survive the completion of its semi-tontine divi- 
dend period, as aforesaid, and unless this policy shall then be in force. 

That the condition last preceding be'ng contained in all policies issued on the 
semi-tontine dividend plan, all surplus accumulations made in consequence thereof 
shall be apportioned equitably among policies issued on that plan, which shall 
complete their semi-tontine dividend periods. 

That upon completion of the semi-tontine dividend period, providing this policy 
shall not have been previously terminated by death, lapse or surrender, the said 
insured, or his assigns, without the consent of any other party named herein as 
beneficiary, if any, shall have one of the following options : First, to apply the 
accumulated surplus apportioned by the company to this policy to the purchase 
of an annuity on the life of the insured, to be used in the reduction of subsequent 
premiums on this policy, and in case the amount accruing in any year from the 
annuity shall exceed the amount of premium due hereon, the excess shall be paid 
in cash. Second, to withdraw in cash the accumulated surplus apportioned by the 
company to this policy, and continue the policy in force on the ordinary plan. 
Third, to surrender this policy to the company and withdraw in cash the net re- 
serve by the Actuaries' Experience Table of Mortality and four per cent, interest, 
five thousand three hundred and thirty-three and 10-100 dollars, and in addition 
thereto the surplus apportioned by the company to this policy. Fourth, to con- 
vert the entire cash value of this policy into a life annuity upon the life of the in- 
sured. Fifth, to convert the entire cash value of this policy into a participating, 
paid-up policy, for an equivalent amount. Sixth, to convert the same into a larger 
non-participating paid-up policy. Provided, always, that if the amount of said 
paid-up policy in either case shall exceed the original amount of insurance, a sat- 
isfactory certificate of good health from one of the company's medical examiners , 
shall be required. 

It is understood that no less than three months prior to the completion of the 
semi-tontine dividend period, the said insured shall notify the company in writing, 
which option is selected ; and that if no such notification shall be received, then, 
and in that case, the surplus apportioned to this policy shall be applied to the pur- 
chase of an annuity, as stipulated in the first option stated above. 

In any settlement under this policy there shall be deducted from the amount 
payable all indebtedness to the company on account of this policy. 

GENERAL PROVISIONS. 

This policy is a contract made and to be performed in accordance with the laws 
of the State of Iowa, and does not go into effect until the first premium has been 
actually paid, during the lifetime and good health of the within named insured. 

If any statement or agreement made in the application for this policy be in any 
material respect untrue, this policy shall be void, and all payments which shall 
have been made to the said company shall belong to and be retained by the com- 
pany ; provided, however, that discovery of the same must be made by said com- 
pany, and notice thereof given to the insured, within two years from the date 
hereof. 

All premiums are due and payable at the home office of the company, unless 
otherwise agreed in writing, but may be paid to agents producing receipts signed 
by the president or secretary, and countersigned by such agents. 



OF LIFE INSURANCE. 



153 



Notice that each and every premium is due at the date named in the policy, is 
given and accepted by the delivery and acceptance of this policy, and any further 
notice required by any statute is hereby expressly waived. The giving of any 
other notice shall not be deemed as establishing a custom, or as waiving or dis- 
turbing any of the conditions as to payment of premiums thereafter due. 

No agent has power in behalf of the company to make or modify this, or any 
contract of insurance ; to extend the time of paying a premium ; to waive any for- 
feiture ; to issue a permit of residence, travel or occupation ; or to bind the com- 
pany by making any promise, or receiving any representation or information. 
This power can be exercised only by the president or secretary, and will not be 
delegated. 

Any assignment of this policy must be made in duplicate, and both copies must 
be sent to the home office for acknowledgment, one of them to be retained by the 
company. Under no circumstances will the company assume any responsibility 
for the validity of any assignment. 

NON-FORFEITURE PROVISIONS. 

If this policy shall lapse or become forfeited for the non-payment of any pre- 
mium when due, after there shall have been paid hereon two full yearly pre- 
miums, as above specified, the net reserve on this policy at the time of lapse, com- 
puted by the Actuaries' Experience Table of Mortality and four per cent, interest, 
after deducting all indebtedness to the company, shall be applied by the company, 
first, to the purchase of a non-participating, paid-up policy, payable at death, pro- 
vided demand shall be made within three months after such lapse, with surrender 
of this policy ; or, second, to the purchase of non-participating term insurance, 
for the full amount insured by this policy. No part, however, of such term insur- 
ance shall be due or payable unless satisfactory proofs of death be furnished to the 
company within one year after death ; and if death shall occur after such non- 
payment of premium, and during such term insurance, there shall be deducted 
from the amount payable the sum of all the premiums which would have become 
due on this policy if it had been continued in force. 

The following table shows the three non- forfeiture options above referred to : 





lis 


Case of Lapse of Policy. 


Number 








of Yea s 




Extended Insurance 




Premiums 




Without Action. 




Paid. 


Paid-up Policy. 




Cash Value. 




Yea r s. 


Days. 




2 


$1,000.00 


3 


173 




3 


1,500.00 


5 


126 


$569!§0 


4 


2,000.00 


rt 


99 


774.40 


5 


2,500.00 


9 


68 


987.80 


6 


3 000.00 


11 


5 


1,209.90 


7 


3,500.00 


12 


251 


1,44120 


8 


4,000.00 


14 


67 


1,881.90 


9 


4,500.00 


15 


183 


1,932.10 


10 


5,000.00 


16 


238 


2,191.80 


11 


5,500.00 


17 


238 


2,461.10 


12 


6,000.00 


18 


192 


2,740.00 


13 


6,500.00 


19 


105 


3,029.00 


14 


7,000.00 


19 


353 


3,328.80 


15 


7,500.00 


20 


211 


3 639 80 


1G 


8,000.00 


21 


54 


3,962 90 


17 


8,500.00 


21 


256 


4,298.70 


18 


9,000.00 


22 


100 


4,648.30 


ID 


9,500.00 


22 


348 


5,012.50 


20 


10,000.00 

! 


~ Paid 


Up. 


5,393.10 



At the completion of the third policy year, or any year thereafter, if this policy 



154 



THE THREE SYSTEMS 



is In force, it may be surrendered by the insured to the company, without the con- 
sent of any other party named herein as beneficiary, if any, upon thirty days pre- 
vious written notice, and the company will pay in cash upon such surrender the 
net reserve by the Actuaries' Experience Table of Mortality and four per cent, 
interest, after deducting therefrom all indebtedness to the company on account of 
this policy. 

The following is an assumed example of a twenty-year bond : 
Amount of bond, $10,000 ; age 30 ; annual premium, $513. 





Total 


Reserve at 




Total 


Reserve at 


Year. 


Premiums 


4 Per Cent. 


Year. 


Premiums 


4 Per Cent. 




Paid. 


Guaranteed. 




Paid. 


Guaranteed. 


1 


$513.00 


$313.10 


11 


$5,643.00 


$4,338.90 


2 


1,026.00 


640.00 


12 


6,156.00 


4,852.40 


3 


1,539.00 


981.40 


13 


6,669.00 


5,390.90 


4 


2,052.00 


1,338.00 


14 


7,182.00 


5,955.90 


5 


2,565.00 


1,710.90 


15 


7,695.00 


6,547.20 


6 


3.078.00 


2,100.60 


16 


8,208.00 


7,169.20 


7 


3,591.00 


2,508.20 


17 


8,721.00 


7,822.70 


8 


4,104.00 


2,93180 


18 


9,234.00 


8,510.20 


9 


4,617 00 


3,381.30 


19 


9,747.00 


9,235.00 


10 


5,130.00 


3,848.90 


20 


10,260.00 


10,000.00 



The amount given in the table as reserve is indorsed on the bond 
after the third year as its cash surrender value. The reserves or guar- 
anteed cash values under both the bonds and the Semi-tontine policies 
will, as required by the insurance law of Iowa, be on deposit with 
the Insurance Department of the State of Iowa. Thus, in effect, the 
State of Iowa guarantees the full reserve under these contracts. 

These bonds are issued on the return premium plan. Should death 
occur while the bonds are in force the company pays the face of the 
bonds, together with all installments paid. At the maturity of the 
bonds the holder shares equitably in the surplus accumulated. 

The following is a copy of the Iowa law governing regular life in- 
surance companies organized in that State : 



CODE OF IOWA— 1873. 
Title IX., Chapter 5. 

Section 1169. As soon as practicable after the filing of said state- 
ment of any company organized and doing business under the laws of 
this State in the office of the Auditor of State, he shall proceed to as- 
certain the net cash value of each policy in force upon the basis of the 
American Experience Table of Mortality and four and one-half per 
cent, interest, or Actuaries' Combined Experience Table of Mortality 
and four per cent, interest. 

Upon ascertaining the net cash value of all policies in force in any 
company organized under the laws of the State, the Auditor shall 
notify said company of the amount, and within thirty days after the 
date of such notification the officers of such company shall deposit 
with the Auditor the amount of such ascertained valuation of all poli- 
cies in force in the securities described in section 1753 of this chap- 
ter. 



OF LIFE INSURANCE. 155 

Section 1179. No company organized under the provisions of this 
chapter shall invest its funds in any other manner than as follows : 
In bonds of the United States. In bonds of this State or of any 
other State if at or above par. In bonds and mortgages on unincum- 
bered real estate within this State, or in any other State in which 
such company is transacting an insurance business, worth at least 
twice the amount loaned thereon, exclusive of improvements. In 
bonds or other evidences of indebtedness, bearing interest of any 
county, incorporated city, town or school district within this State, or 
any other State in which such company is transacting an insurance 
business, where such bonds or other evidences of indebtedness are 
issued by authority of law, and are approved by the executive council. 
(McClain's Annotated Code of Iowa, 1888 ; sections 1743 and 1753.) 

The conservative manner in which this company has been man- 
aged ; its careful selection of risks, which is evidenced by its mor- 
tality not having exceeded 60 per cent, of the mortality tables ; its 
location, where it can secure the highest possible rates of interest, and 
on the best security, because of its location being in the most rapidly 
developing part of the country ; the fact that its loans must be ap- 
proved by the State and confined to the class of securities named in 
section 1179 of the Code as amended, and that such securities must 
be deposited with the Insurance Department of Iowa covering the 
full reserve or cash value of every contract issued — this, we think, 
should command the confidence of the public, and justifies us in say- 
ing that the policies issued by this company are the nearest possible 
approach 10 absolute security. 



THE 



Assessment System, 



ITS DISTINGUISHING CHARACTERISTICS 



AND 



PLANS OF COMPANIES. 



CHAPTER XI. 



The Assessment System.— Its Distinguishing Characteris- 
tics. — Requisites F<m Soundness and Permanency —The 
Fouse Plan, as operated by the Fidelity Mutual Life 
Association. — The Foundation Principles. — Proof of 
the Sufficiency of the Rates.— Table No. 3. — Explan- 
ation and Application of Table No. 3. — Table No. 
5. giving Maximum Assessments.— Remarks. — Equation 
Rate of this Plan.— Notation. — Formula. — Corporate 
Powers, By-Law and Contract Provisions. — Remarks. 

III. THE ASSESSMENT SYSTEM. 

Its Distinguishing Characteristics. 

1. Premiums— usually called assessments -whether 

collected before or after the death of a member 
are not limited except by the actual mortality 
needs of the company. Some societies collect 
after each death, others at fixed dates, monthly, 
bi-monthly, quarterly, etc., the amount of the 
assessment being determined by the number of 
deaths which have occurred since the preceding 
assessment. The leading business associations, 
however, collect stipulated premiums in advance 
to cover the net cost of insurance, as indicated 
by one of the standard mortality tables, and in 
lieu of the " legal reserve " incorporate in the 
policy the vested right of collecting more, if 
necessary, by assessment. 

2. The 'contract between the company or society 

and the insured is called, by some "a Certificate 

of Membership " ; by Others, ".a Policy." 

3. The certificate or policy is required under the laws 

of most of the States to designate a definite sum 
to be paid by the society to the beneficiary, but 
the payments to be made by the member to the 
society must be flexible. When the premiums 
or assessments are inflexible, then the benefits 
under the certificates must be flexible or variable. 

4. The rate of assessment in one class of societies is a 

fixed rate ; that is to say, the members are divided 
into classes according to their respective ages, 
something like the following, for instance: All 
from 21 to 30, inclusive, constitute the First 
Class; those from 31 to 40, inclusive, the Second 
Class ; those from 41 to 48, the Third Class ; those 



160 THE THREE SYSTEMS 

from 49 to 55, inclusive, the Fourth Class; 
and those from 5Q to Q5, inclusive, the Fifth 
Class ; the classification extending no further 
than age (55 ! Upon the death of a member 
the rate of assessment for each $1,000 of 
certificate depends upon the class he is in. 
The rate is fixed at date of admission, and 
remains unchanged so long as his membership 
continues. In another class of societies the 
classification may be the same but the rating 
changes. For example, the new member may 
be 28, and consequently, he is in the first 
class at date of entry, but when he becomes 
31 he is a member of the second class ; when 
41, the third class, and so on; his rate of as- 
sessment being changed to a higher one 
whenever he goes from one class to another 
In still another class of societies, whenever 
an assessment is levied, each member is as- 
sessed according to his then age, no matter 
what his age was when he entered the 
society. If 21 years old when an as- 
sessment is made, he pays according to 
the risk the society is carrying on him 
at that age ; if 22, the rate is a little 
higher, because the risk is greater ; if 23, 
the rating is still higher, and so on, 
through all the different ages. In some of 
these societies the rating is a little higher 
than needed for the actual current death 
rate, and the surplusage goes to the gradual 
accumulation of a reserve fund that may be 
used as designated in the certificate of mem- 
bership. This voluntary reserve fund is not 
generally available until the insured has been 
a member for several years— five to fifteen 
generally — and it is called by different names, 
and is available at different times for various 
purposes, according to the different ideas of 
the organizers of different societies. We 
have not the space to name all, or one -hun- 
dredth part of the different phases of assess- 
ment insurance in this country. The princi- 
ples, however, underlying sound assessment 
insurance, are few, and these we intend to 
make prominent. 



of life insurance. 161 

Requisites for Soundness and Permanency. 

a.— "Nothing" is more proverbially uncertain," says 
Dr. B abb age, " than the duration of human life 
-when the maxim is applied to an individual; 
but there are few thing's less subject to fluctua- 
tions than the average duration of life in a 
multitude of individuals." 

Dr. Southwood Smith says: " Mortality is sub- 
ject to a law the operation of which is as regu- 
lar as that of gravitation." 

The concurrent testimony of all writers on 
the subject of vital statistics is that the law of 
mortality is as certain in its operations as are 
those of light, heat, electricity and chemical 
affinity. This law is epitomized in the Actu- 
aries', and the American Tables of Mortality, 
found in other parts of this book. 

By the former, out of 1,000 persons living 
at the beginning of a year, at age 20, seven die 
during the year ; at age 30, eight; at age 40, 
ten ; at age 50, sixteen; at age 60, thirty ; at age 
70, sixty-jive; at age 80, one hundred and forty; at 
age 90, three hundred and twenty-four; and at age 
99, one thousand! 

The law of Mortality says— and every com- 
pany or society that disregards it does so at 
great peril— that $7.01 must be charged for 
$1,000 of insurance, for one year, on a life at 
age* 20, besides an equitable amount for ex- 
penses; when that life attains the age of 30, 
the sum of $8. 10 must be charged for the same 
amount of insurance for one year; at age 40, 
the sum of $9.96 must be charged; at age 50, 
the charge must be $15.33; at age 60, not less 
than $29.17; at 70, at least $62.44; at 80, it 
is not safe to charge less than $135.01 ; and at 
90 and 99, for $1,000 of insurance for one year, 
the sum of $311.28 and $961.54 must be 
charged, respectively, and for intermediate 
ages, amounts proportional to the respective 
ages. 

A maximum sum, therefore, considerably 
larger than that indicated by the law of Mor- 
tality should be fixed to begin with for each 
$1,000 of insurance at each age, increasing 
every year, thereafter, commensurate with the 



162 THE THKEE SYSTEMS 

increasing liability of the member to die ; and 
this maximum should be named in the certifi- 
cate of membership as the basis of assessments 
on any one person for any one year. 

The maximum sum to be assessed, as above, 
should provide for a special reserve fund, avail- 
able only to the person contributing it after 
5 to 15 or more years of consecutive member- 
ship. If the certificate were to lapse before the 
expiration of the period named in the certifi- 
cate said special reserve accumulations should 
be equitably credited to persistent members. 
This would operate as a kind of cement to 
hold the membership together and to reduce 
heavy mortality at the older ages. 

b— The necessary expenses of a society should be 
provided for by the collection, from each 
member, annually in advance, or when an as- 
sessment is paid, or both, regardless of age, of 
a uniform fixed amount for each $1,000 of in- 
surance named in the certificate. A uniform 
per centum loading on an increasing net pre- 
mium is inequitable. 

c— Good Management.. 

In illustrating assessment insurance we shall use only a few 
of the best forms. 



I. THE FOUSB PLAN. 

The author of this plan of insurance, L. G. Fouse, 
Esq., of Philadelphia, belongs to the modern school of 
actuaries, and is one of the ablest and most conscientious mem- 
bers of the profession. Although still young, no man has done 
more toward reforming the methods and extruding and prevent- 
ing the abuses of assessment insurance ; no man has been more 
unsparing of time and labor in bringing the doctrine of proba- 
bilities as applied to human life — in short, insurance mathematics 
— within the comprehension of the masses. He is a zealous ad- 
vocate of improvement in life insurance, an earnest believer in 
the doctrine that good sound life insurance can be furnished at 
a price so far below that hitherto charged, as to increase tenfold 
its beneficent results. How far he has succeeded in this direc- 
tion can best be determined by an examination of the "Fouse 
Plan of Insurance," as operated by the Fidelity Mut- 



OF LIFE INSURANCE. 163 

ual Life Association of Philadelphia, Pa. It has now 

been upon trial over thirteen years with results that its originator 
may well regard with honest pride. 

The calculations and tables, which are correct, are his own, 
and some of them have never before been published. 

The foundation principles of this plan are: 

1st. That the members should pay, during the prob- 
able life of each, like sums for like benefits. 

2d. That members should participate in and enjoy 
the profits or advantages accruing to the company from selec- 
tion, lapse,etc., in proportion to their respective interests in the 
company. 

3d. That the losses should be borne by the members 
in proportion to their probability of persisting, death liability, 
and respective shares. 

4th. That all men, regardless of age, should contribute a 
like annual amount for a like benefit to the expense fund of the 
company ; that it is not equitable to load the net premium with 
a uniform percentage, thus compelling one man to pay $5 and 
another $25 for the same service. 

5th. That the chances of policies terminating from 
causes other than death should be taken into account in calculat- 
ing a ''self-insurance fund/' or accumulation necessary to equalize 
the risk of the company, and secure a level rate to the insured. 

The first of these principles may be better understood 
by the following illustration: If we should send three messen- 
gers from a given point, whose duty it should be to go to an- 
other point, and each having been given the opportunity to 
choose his own route, and one should reach the destination by 
traveling 18 miles, one 22 miles, and the other 26 miles, it would 
seem equitable and just that all should have a like or the same 
compensation. So under this plan, the time intervening between 
age of entry and when the insured will reach the equal chance 
between life and death, which is the term of probable life, the 
aggregate contributions of the policy holders will be a like 
sum for a like benefit, although one member, by reason of 
his age, has 18 years to pay, another 22 years, another 26 years, 
etc., according to his probable life. The chances of life from 
the starting point being equal, render the aggregate payments 
under this plan equal during the chance period, and at the same 
time the payments are graded with regard to the death liability 
of the insured. 

By the second principle enunciated above is understood 
that the natural profits accruing to the company should be dis- 
tributed among the policy holders, according to their respective 
interests, as they accrue from time to time, and not be deferred, 
thereby depriving members whose policies terminate early (either 



164 THE THREE SYSTEMS 

through death or lapse) of what is fairly their own. To this 
end the company's rates are reduced to the extent of what ex- 
perience has shown to be a handsome profit, and hence its 
members enjoy the advantages of such profit from the beginning. 

By the third principle, we are to understand, that since 
the chance of remaining in the company is largely diminished 
from causes other than death (a fact as well established as any- 
thing that has to do with the doctrine of probability) it is not 
right to collect from the insured an amount based on the assump- 
tion that every policy holder will remain in the company until 
death. The degree of constancy in the lapse rate is as great, if 
not greater, than that observed in the death rate. Insurance 
being founded wholly on the doctrine of probability, it is claimed 
that the event of lapse, which to some degree accrues to the ad- 
vantage of the persisting policy holders, the recurrence of which 
is as well established as any other factor of probability, should 
not be ignored in the construction of rates; when it is ignored, 
it can only be remedied by dividends, and these are often de- 
ferred, so that a large number of the insured who, by misfortune 
or other causes are unable to continue their insurance, are wholly 
deprived of the benefits to which they are justly entitled. 

The doctrine presented in the fourth principle is, 
that the age of the insured in no manner affects the expense of 
management. Salaries, office rent, licenses, taxes, advertising, 
printing, and all the expenses of an insurance office, are the 
same whether the members are aged 25 or 60. If there be any 
difference, the expense of obtaining risks at the more advanced 
ages, on account of the greater willingness to insure, is less 
than it is at the younger ages. 

The fifth principle is opposed to the doctrine that all pol- 
icies should have to their credit at the end of the table, or age 
96, a sum equal to their face value. This is the effect of policies 
issued on the legal reserve plan, and hence, after the insured 
reaches an advanced age the company will have in its possession 
nearly as much money as it agrees to pay in the event of death, and 
hence the premiums paid afterward by the insured purchase no insur- 
ance at all. Under the Fouse Plan, the self-insurance fund 
necessary to equate the natural rate is greatly diminished by dis- 
counting the chances of the company's payment, by the probable 
lapse as well as the rate of interest assumed. 



PROOF OF THE SUFFICIENCY OF THE RATES 
ADOPTED UNDER THE PLAN. 

Taking as a governing principle the general law "that what 
has happened in a large number of instances in the past may be 
accepted as a fact to determine the result of a series of coining 



OF LIFE INSURANCE. 



165 



events of the same kind, etc.," a calculation was made on the 
basis of 11,000 persons between the ages of 20 and 60 years, in 
which it was assumed that the members would enter at the 
respective ages, in the proportion indicated by Table No. 1, that 
lapses would occur as indicated by Table No. 2, and that deaths 
would occur according to the American Table of Mortality Expe- 
rience. It was further assumed in the calculation that the num- 
ber retired annually by death and discontinuance would be 
replaced by new members, in the proportion and at the ages 
indicated in Table No. 1. 



TABLE NO. 1. 

Percentage of Entrants to Whole Number at the Respective 

Ages. 



Age. 


Percentage. 


Age. 


Percentage. 




25 


3.8 


43 


2.8 




26 


4.0 


44 


2.6 




27 


4.2 


45 


2.5 




28 


4.8 


46 


2.2 




29 


4.5 


47 


2.0 




30 


4.9 


48 


1 8 




31 


4.7 


49 


1.6 




32 


4.7 


50 


1.6 




33 


4.7 


51 


1.2 




34 


4.6 


52 


1. 




35 


4.6 


53 


1. 




36 


4.4 


54 


0.8 




37 


4.1 


55 


0.7 




38 


4.1 


56 


0.6 




39 * 


3.7 


57 


0.5 




40 


3.9 


58 


0.4 




41 


3.2 


59 


0.3 




42 


3.1 


60 


0.3 



166 



THE THREE SYSTEMS 



TABLE NO. 2. 

* Percentage of Discontinuances to Whole Number of Policies 



Years. 


Percentage. 


Years. 


Percentage. 


1 


10 


19 


3 


2 


10 


20 


3 


3 


10 


21 


%H 


4 


10 


22 


%X 


5 


10 


23 


%% 


6 


$% 


24 


2 


7 


m 


25 


2 


8 


m 


26 


iH 


9 


5M 


27 


IX 


10 


5M 


28 


*X 


11 


4 


29 


IX 


12 


3% 


30 


IX 


13 


Ol -' 


31 


l 


14 


. ZM 


32 


l 


15 


%% 


33 


l 


16 


3 


34 


l 


17 


3 


35 


l 


18 


3 







* To be on the safe side, this percentage was reduced below the actual 
experience of American companies. 

The fact " that new members will supply the places 
of those who die and lapse/' may, to say the least, be re- 
ceived as of the very highest probability, because the entire 
history of legitimate life insurance shows that the companies 
have not only been able to fill the places of the discontinued and 
deceased, but they have steadily increased in membership and 
amount of insurance written. It is possible and probable that 
such will not be the case in an insurance company founded in 
ignorance and on errors; but nothing can be predicated or based 
on organizations of that character. 

A reference to the mortality experience of existing legitimate 
insurance companies shows that the increase in the general aver- 
age death rate is comparatively small. This, of course, is owing 
to a steady and healthy growth in the number of policies and 
amounts of insurance issued by the companies, and the termina- 
tion of policies from causes other than death. In the calculation 
referred to, the benefit to be derived from selection, that is, the 
saving during the selection period, lasting about five years, 
between the mortality assumed and actually experienced has not 
been taken into account. The object of the calculation was, to 
ascertain the ratio of increase in the death rate of a company, 
having and maintaining a uniform membership from the first 
year of its existence forward, upon the assumptions and estab- 
lished laws of life insurance, as hereinbefore set forth. The 
calculation was continued until all the original entrants had 



OF LIFE INSURANCE. 



167 



either died, at the rate indicated by the American Table of Mor- 
tality Experience, or lapsed, according to the percentage indicated 
in Table No. 2. 

The following table shows the number of deaths per 1,000 
members, according to the years of the theoretical company: 

TABLE NO. 3. 



Years of the 


No. of Deaths per ioco 


Years of the 


No. of Deaths per 


Company. 


in the Company. 


Company. 


iooo in the Company. 


1 


11.57 


39 


24.32 


2 


11.97 


40 


24.373 


3 


12.34 


41 


24.417 


4 


12.7 


42 


24.449 


5 


13.11 


43 


24.479 


6 


13.4 


44 


24.492 


7 


13.744 


45 


24.502 


• 8 


14.115 


46 


24.492 


9 


14.476 


47 


24.508 


10 


14.866 


48 


24.503 


11 


15.278 


49 


24.494 


12 


15.723 


50 


24.483 


13 


16.17 


51 


24.471 


14 


16.617 


52 


24.471 


15 


17.067 


53 


24.431 


16 


17.536 


54 


24.430 


17 


17.995 


55 


24.421 


18 


18.46 


56 


24.403 


19 


18.917 


57 


24.387 


20 


19.363 


58 


24.371 


21 


19.814 


59 


24.36 


22 


20.237 


60 


24.342 


23 . 


20.674 


61 


24.331 


24 


21.058 


62 


24.32 


25 


21.438 


63 


24.312 


26 


21.826 


64 


24.305 


27 


22.188 


65 


24.301 


28 


22.507 


66 


24.298 


29 


22.797 


67 


24.295 


30 


23.064 


68 


24.294 


31 


23.289 


69 


24.294 


32 


23.478 


70 


24.294 


33 


23 . 633 


71 


24.295 


34 


23.826 


72 


24.296 


35 


23.956 


73 


24.298 


36 


24.072 


74 


24.299 


37 


24.169 


75 


24.3 


38 


24.25 


76 


24.3 



It will be observed that the company reached its highest death 
rate in the forty-seventh year of its existence, but after the thirty- 
fifth year the variation in the mortality is indeed very slight. 
Before proceeding any farther with the object and purpose of 
the calculation, we will compare the mortality experience of the 



168 THE THREE SYSTEMS 

theoretical company with that of the oldest companies in the 
United States: 

Connecticut Mutual, organized 1846, death rate, 41st year, 18.29 

Mutual Life, " 1843, " 44th " 13.25 

Mutual Benefit, " 1845, " 42d " 16.89 

N. E. Mutual, " 1843, " 44th " 13.25 

N. Y. Life, " 1845, " 42d " 10.47 

State Mutual, " 1845, " 42d " 13.76 

The average existence of the six companies is 42% years, and 
the average death rate per each 1,000 members exposed the forty- 
second year is*14.32. By referring to Table No. 3, it will be seen 
that the death rate of the theoretical company the forty second 
year is 24.44 per 1,000 exposed, a difference in favor of the actual 
as compared with the theoretical of over ten to the thousand. 

One of the oldest companies in the world, the Equitable 
Society of London, in which the ordinary precautions in selec- 
tion were not exercised, and in which its accessions were in the 
main voluntary, the death rate in its sixty-seventh year was 25.61 
per 1,000, and has since had but very little variation from that 
rate. In the Equitable, as in all English companies, the acces- 
sion is comparatively small, and the persistence of the members 
is great. During a period of 67 years, the Equitable Society of 
London admitted to membership 21,398 persons, of whom 5,144 
continued members until death, 9,324 discontinued from other 
causes, and 6,930 still remained. Even with such a remarkable 
persistence as that indicated by the experience of the Equitable 
of London (an experience that has never been approached by any 
company in the United States) the death rate of the Equitable is 
only a trifle in excess of that of the theoretical company. 

That the experience of the Equitable Society of London, in 
the matter of persistence of its members, is unusual and remark- 
able, is shown by the experience of thirty American offices dur- 
ing a period of thirty years. These offices admitted 1,027,529 
lives, of whom 46,543 died, 431,568 discontinued, and 549,418 still 
existed. In the equitable Society of London to each death 1.81 
lapsed, while in the thirty American offices to each death 9.27 
lapsed or discontinued. The Equitable Society of London may 
be said to represent the highest extreme in the matter of the 
insured persisting until death, that has ever been attained or 
experienced in the history of life insurance. The above state- 
ment of facts is sufficient proof that a properly managed com- 
pany in the United States will never have a death rate to exceed 
that indicated by Table No. 3. It should here be understood 
that Mr. Fouse does not claim that the death rate of a company 
can be kept below that indicated in Table No. 3 if its members 
are not required to pay their share of all the death losses, in pro- 
portion to their respective individual death liability, as indicated 

* Three years later the average death rate was only 14.66. 



OF LIFE INSURANCE. 

by some one of the standard mortality tables. A company that 
ignores the foundation principles of life insurance, is sure at 
some time to have a widely different, if not fatal experience. 

EXPLANATION AND APPLICATION OF TABLE 

NO. 3. 

The author of this plan holds that instead of requiring mem- 
bers to pay a natural, increasing or step rate, as indicated by the 
mortality table with reference to the individual liability, they 
should only be required to pay their proportion of the 
increase of mortality in the collective membership, apportioned 
according to the individual death liability and probability of life. 
We find in Table No. 3 that the death rate of the theoretical com- 
pany the first year was 11.57 to the 1,000; this death rate resulted 
from applying the American Table of Mortality Experience to the 
respective ages exposed, so that the member aged 20 paid the 
first year $7.75 per $1,000 insurance, the member aged 30 paid 
$8.50, etc. The second year of the company the death rate 
increased from 11.57 to 11.97, or .4 to the 1,000. It is clear that 
this increase occurred among the 9,773 of the original 11,000 
members who remained in the company during its second year, 
and it is among these that the increase of .4 to the 1,000 must be 
divided in proportion to their individual death liability. The 
third year the death rate was 12.34, an increase of .77 over the 
first year, and .32 over the second year. This increase again 
must be met by those who were two and three years respectively 
in the company, in proportion to their individual death liability. 
The new entrants who came in and took the place of the discon- 
tinued and deaths, in any year of the calculation, were not 
required to contribute even a mite toward paying the increased 
mortality of those who entered in former years. The new mem 
bers who entered from year to year followed the same laws as 
the original 11,000, received the same treatment, and were, of 
course, compelled to pay the same sum as they advanced in 
age. In this manner a table of rates was constructed for the 
various ages between 25 and 60 years, taking as the basis the 
individual liability of each member at age of entry, according 
to the American Table of Mortality Experience, and increas- 
ing the rate of each member over the rate at age of entry, 
according to the increasing death rate of the company, for the 
purpose of providing enough to pay the losses as they occur and 
increase from year to year. In order to show the proportion of 
the increase of mortality, as given in Table No. 3, properly 
chargeable to age 50, during the term of probable life, we will 
submit the following table: 



170 



THE THREE SYSTEMS 

TABLE NO. 4. 



Natural Rate in a Variable Membership of Uniform Number, 
for a Person Entering at Age 50 per $1,000 Insurance. 



Years of Policy. 


Rate of Premium. 


Years of Policy. 


Rate of Premium. 


1 


15 43 


12 


20.98 


2 


. 15.97 


13 


21.59 


3 


16.47 


14 


22.17 


4 


16.95 


15 


22.76 


5 


17.49 


16 


23.41 


6 


17.87 


17 


24.02 


7 


18.34 


18 


24.63 


8 


18.83 


19 


25.24 


9 


19,35 


20 


25.84 


10 


19.84 


21 


26.43 


11 


20.38 


22 


27.02 



The sum of these payments or premiums for any age during 
probable life amounts to $461.01 for $1,000 insurance. 

Under what is known as the Indemnity Reserve Plan 
of the Fouse System, the $461.01 graded according to age 
and policy years, the same as represented in Table No. 4 for 
age 50, was increased $538.99, or to just $1,000. This was done 
by dividing the $538.99 into 461.01 parts, and each part was mul- 
tiplied by the successive numbers of the table for each age, be- 
ginning at age 50 with $15.43. 

This table of maximum rates, known as the Indemnity Reserve, 
constitutes the limit of liability of persons, according to age and 
years of policy, insured under the Fouse Plan. 



OF LIFE INSURANCE. 

TABLE NO. 5. 



171 



Showing" the Maximum Rates for $1,000 Insurance for all Ages 
Between 25 and 60 Years, from the First Year of Insur- 
ance to the End of the Probability of Life. 



Age of 
Entry. 


25 


26 


27 


28 


29 


30 


31 


Years 


Prob. of 


Prob. of 


Prob. of 


Prob. of 


Prob. of 


Prob. of 


Prob. of 


of 


Life. 


Life. 


Life. 


Life. 


Life. 


Life. 


Life. 


Insur. 


43 Years. 


42 Years, 


41 Years. 


40 Years. 


39 Years. 

1.571 


38K Yrs. 
1.597 


37 3-5 Y rs. 


~T~ 


1.388 


1.428 


1.472 


1.519 


1.648 


2 


1.435 


1.478 


1.518 


1.57 


1.625 


1.654 


1.706 


3 


1.48 


1.524 


1.57 


1.619 


1.677 


1.706 


1.760 


4 


1.522 


1.568 


1.616 


1.666 


1.726 


1.754 


1.808 


5 


1.572 


1.62 


1.668 


1.72 


1.78 


1.812 


1.866 


6 


1.606 


1.655 


1.708 


1.759 


1.82 


1.851 


1.906 


7 


1.647 


1.697 


1.748 


1.804 


1.868 


1.9 


1.957 


8 


1.692 


1.743 


1.797 


1.851 


1.918 


1.949 


2.011 


9 


1.735 


1.788 


1.842 


1.899 


1.967 


2. 


2.063 


10 


1.782 


1.836 


1.894 


1.95 


2.019 


2.051 


2.117 


11 


1.832 


1.886 


1.946 


2.004 


2.075 


2.112 


2.178 


12 


1.886 


1.941 


2.004 


2.064 


2.135 


2.171 


2.240 


13 


1.939 


1.997 


2.059 


2.121 


2.197 


2.234 


2.303 


14 


1.993 


2.052 


2.117 


2.181 


2.258 


2.295 


2 366 


15 


2 047 


2.108 


2.175 


2.242 


2.319 


2.357 


2.434 


16 


2.1 


2.163 


2.231 


2.3 


2.383 


2.423 


2.497 


17 


2.159 


2.222 


2.292 


2.363 


2.445 


2.485 


2.563 


18 


2.213 


2.28 


2.351 


2.425 


2.507 


2.550 


2.631 


19 


2.269 


2.336 


2.41 


2.486 


2.569 


2.614 


2.694 


20 


2.322 


2.391 


2.467 


2.543 


2.631 


2.677 


2.757 


21 


2.375 


2.446 


2.523 


2.603 


2.689 


2.734 


2.82 


22 


2.428 


2.499 


2.578 


2.66 


2.747 


2.795 


2.883 


23 


2.47.6 


2.55 


2.631 


2.714 


2.805 


2.854 


2.9,3 


24 


2.525 


2.602 


2.682 


2.77 


2.86 


2.909 


2.997 


25 


2.572 


2.652 


2.732 


2.821 


2.913 


2.962 


3.054 


26 


2.618 


2.698 


2.779 


2.871 


2.966 


3.015 


3.109 


27 


2.669 


2.751 


2.835 


2.93 


3.014 


3.065 


3.16 


28 


2.7 


2.782 


2.868 


2.962 


3.057 


3.109 


3.206 


29 


2.741 


2.826 


2.911 


3.008 


3.098 


3.148 


3.249 


30 


2.766 


2.85 


2.937 


3.035 


3.134 


3.186 


3.286 


31 


2.793 


2.878 


2.967 


3.065 


3.166 


3.217 


3.317 


32 


2.816 


2.901 


2.99 


3.09 


3.19 


3.246 


3.346 


33 


2.839 


2.926 


3.016 


3.116 


3.216 


3.268 


3.374 


34 


2.858 


2.944 


3.037 


3.137 


3.239 


3.292 


3 394 


35 


2.873 


2.961 


3.052 


3.153 


3.255 


3.308 


3.414 


36 


2.887 


2.975 


3.068 


3.169 


3.267 


3 326 


3.429 


37 


2.901 


2.989 


3.082 


3.188 


3.285 


3.34 


3.443 


38 


2.907 


2.996 


3.091 


3.196 


3.297 


3.352 


2.071 


39 


2.916 


3.005 


3.103 


3.208 


3.307 


1.68 




40 


2.923 


3.013 


3.113 


3.218 








41 


2.928 


3.019 


3.12 










42 


2.931 


3.024 












43 


2.939 




1 











172 THE THREE SYSTEMS 

TABLE NO. 5.— (Continued.) 

Showing the Maximum Rates for $1,000 Insurance for all Ages 
Between 25 and 60 Years, from the First Year of Insur- 
ance to the End of the Probability of Life. 



Age of 
Entry. 


32 


33 


34 


35 


36 


37 


38 


Years 


Prob. of 


Prob. of 


Prob. of 


Prob. of 


Prob. of 


Prob. of 


Prob. of 


of 


Life. 


Life. 


Life. 


Life 


Life. 


Life. 


Life. 


Insur. 


37 Years. 


36 Years. 


35 Years. 


34 Years. 


33 2-5 Yrs. 


32^ Yrs. 


32 Years. 


1 


1.681 


1.743 


1.809 


1.88 


1.926 


1.997 


2.037 


2 


1.739 


1.802 


1.871 


1.945 


1.991 


2.066 


2.109 


3 


1.795 


1.86 


1.932 


2.006 


2.055 


2.129 


2.174 


4 


1.846 


1.913 


1.987 


2.064 


2.111 


2.194 


2.237 


5 


1.905 


1.975 


2.051 


2.132 


2.183 


2.263 


2.308 


6 


1.948 


2.018 


2.095 


2.177 


2.234 


2.311 


2.361 


7 


1.997 


2.07 


2.149 


2.233 


2.286 


2.371 


2.421 


8 


2.053 


2.127 


2.208 


2.294 


2 349 


2.434 


2.486 


9 


2.105 


2.181 


2.264 


2.353 


2.409 


2.497 


2.549 


10 


2.161 


2.24 


2.324 


2.415 


2.474 


2.566 


2.618 


11 


2 222 


2.301 


2.389 


2.482 


2.543 


2.634 


2.69 


12 


2.285 


2.368 


2.459 


2.555 


2.614 


2.712 


2.768 


13 


2.352 


2,436 


2.529 


2.628 


2.691 


2.791 


2.849 


14 


2.416 


2.505 


2.6 


2.701 


2.766 


2.866 


2.927 


15 


2.43 


2.572 


2.67 


2.776 


2.84 


2.946 


3.006 


16 


2.551 


2.642 


2.743 


2.849 


2.92 


3.023 


3 089 


17 


2.616 


2.713 


2.815 


2 925 


3. 


3.106 


3.168 


18 


2.684 


2.782 


2.887 


3. 


3.071 


3.186 


3.252 


19 


2.751 


2.852 


2.96 


3.075 


3.149 


3.263 


3.332 


20 


2.817 


2.919 


3.029 


3.147 


3.223 


3.346 


3.409 


21 


2.879 


2.985 


3.099 


3.219 


3.294 


3.417 


3.487 


22 


2.944 


3.05 


3.165 


3.288 


3.366 


3.491 


3.564 


23 


3.002 


3.113 


3.23 


3.355 


3.434 


3.563 


3.635 


24 


3.064 


3.176 


3.294 


3.423 


3.503 


3.634 


3.709 


25 


3.12 


3.234 


3.355 


3.484 


3.569 


3.697 


3.776 


26 


3.175 


3.292 


3.416 


3.548 


3.631 


3.766 


3.844 


27 


3.229 


3.347 


3.471 


3.606 


3.691 


3.826 


3.909 


28 


3.275 


3.395 


3.522 


3.659 


3.746 


3.883 


3.965 


29 


3.318 


3.439 


3.566 


3.706 


3.791 


3.934 


4.016 


30 


3.355 


3.478 


3.608 


3.749 


3.837 


3.980 


4.064 


31 


3.389 


3.511 


3.646 


3.788 


3.874 


4.017 


4.104 


33 


3.418 


3.542 


3.674 


3 816 


3.906 


4.051 


4.137 


33 


3.444 


3.571 


3.704 


3.848 


3 937 


2.040 




34 


3.469 


3.595 


3.729 


3.874 


1.586 






35 


3.488 


3.617 


3.75 










36 


3.507 


3.636 












37 


3.52 














38 
















39 
















40 
















41 
















42 
















43 

















OF LIFE INSURANCE. 173 

TABLE NO. 5.— (Continued.) 

Showing" the Maximum Rates for $1,000 Insurance for all Ages 
Between 25 and 60 Years, from the First Year of Insur- 
ance to the End of the Probability of Life. 



Age of 
Entry. 


39 


40 


41 


42 


43 


44 


45 


Years 


Prob. of 


Prob. of 


Prob. of 


Prob. of 


Prob. of 


Prob. of 


Prob. of 


of 


Life. 


Life. 


Life. 


Life. 


Life. 


Life. 


Life. 


Insur. 


31 Years. 


30 Years. 


29 Years. 


28^ Yrs. 


27^ Yrs. 


27 Years. 


26 Years. 


1 


2.125 


2.219 


2.323 


2.394 


2.494 


2.556 


2.687 


2 


2.198 


2.297 


2.404 


2.477 


2.583 


2.643 


2.781 


3 


2.266 


2.367 


2.479 


2.554 


2.66 


2.726 


2.866 


4 


2.332 


2.438 


2.55 


2.632 


2.737 


2.804 


2 949 


5 


2.408 


2.514 


2 632 


2.714 


2.826 


2.897 


3.045 


6 


2.461 


2.572 


2.692 


2.774 


2.888 


2.962 


3.113 


7 


2.526 


2.637 


2.76 


2.846 


2.963 


3.036 


3.19a 


8 


2.594 


2.709 


2.834 


2.920 


3.043 


3.118 


3.279 


9 


2.658 


2.778 


2 906 


2.997 


3.12 


3.197 


3.362 


10 


2.729 


2.852 


2.986 


3.077 


3.206 


3.284 


3.453 


11 


2.806 


2.932 


3.067 


3.163 


3.291 


3.375 


3.55 


12 


2.888 


3 019 


3.157 


3 254 


3.388 


3.474 


3 652 


13 


2.969 


3.103 


3.248 


3.349 


3 486 


3.571 


3.755 


14 


3.053 


3.188 


3.336 


3.44 


3.583 


3.67 


3.861 


15 


3.134 


3.276 


3.427 


3.534 


3.677 


3.771 


3.966 


16 


3.223 


3.366 


3.522 


3.629 


3.78 


3 874 


4.073 


17 


3.306 


3.452 


3.612 


3.723 


3.88 


3.976 


4.178 


18 


3.392 


3.544 


3.705 


3.823 


3.977 


4.078 


4.288 


19 


3.475 


3.63 


3.799 


3.914 


4 077 


4-179 


4.397 


20 


3.556 


3.717 


3.89 


4.009 


4.174 


4.278 


4.499 


21 


3 638 


3.8 


3.979 


4.1 


4.269 


4.377 


4.602 


22 


3.717 


3.884 


4.064 


4.189 


4.363 


4.471 


4.703 


23 


3 XU 


3.964 


4.148 


4.274 


4.451 


4.562 


4.798 


24 


3.869 


4.043 


4.23 


4.357 


4.54 


4.655 


4.894 


25 


3.94 


4.117 


4.307 


4.44 


4 623 


4.738 


4.982 


26 


4.011 


4.191 


4 383 


4.517 


4 709 


4.823 


5.074 


27 


4.078 


4.26 


4.458 


4.594 


4.783 


4 905 




28 


4.137 


4.321 


4.521 


4.657 


2.429 






29 


4.191 


4.379 


4.581 


1.652 








30 


4.243 


4.431 












31 


4.283 






• 








32 
















33 
















34 
















35 
















36 
















37 
















38 
















39 
















40 
















41 
















42 
















43 










1 







m 



THE TPIKEE SYSTEMS 

TABLE NO. 5.— (Continued.) 



Showing the Maximum Rates for $1,000 Insurance for all Ages 
Between 25 and 60 Years, from the First Year of Insur- 
ance to the End of the Probability of Life. 



Age of 
Entry. 


46 


47 


48 


49 


50 


51 


52 


Years 


Prob. of 


Prob. of 


Prob. of 


Prob. of 


Prob. of 


Prob. of 


Prob. of 


of 


Life. 


Life. 


Life. 


Life. 


Life. 


Life. 


Life. 


Insur. 


25 Years. 
2 831 


24 Years. 


23 2-5 Yrs. 


22 3-5 Yrs. 


22 Years. 


21 Years. 


20 Years. 


1 


2.987 


3.091 


3.232 


3.348 


3 557 


3.788 


2 


2.928 


3.109 


3.194 


3.349 


3.466 


3.679 


3.918 


3 


3.02 


3.187 


3.291 


3.448 


3.573 


3.793 


4.038 


4 


3.107 


3.278 


3.391 


3 549 


3.675 


3.905 


4.156 


5 


3.209 


3.385 


3.500 


3 663 


3.795 


4.031 


4 293 


6 


3.279 


3.46 


3.577 


3.749 


3.877 


4.119 


4.385 


7 


3.363 


3.552 


3.672 


3.837 


3 977 


4.224 


4 498 


8 


3.455 


3.645 


3.769 


3.949 


4.084 


4.34 


4.622 


9 


3.542 


3 736 


3.866 


4.046 


4.189 


4 45 


4.74 


10 


3.638 


3.839 


3.969 


4.154 


4.303 


4.57 


' 4.868 


11 


3.738 


3.945 


4.083 


4.272 


4.422 


4.698 


5.003 


12 


3.848 


4.06 


4.197 


4.394 


4.552 


4.833 


5.148 


13 


3 956 


4.175 


4.314 


4.520 


4.682 


4.97 


5.293 


14 


4.064 


4.289 


4 434 


4.643 


4.8L 


5.11 


5.442 


15 


4.177 


4.406 


4.557 


4.769 


4.939 


5.249 


5.59 


16 


4.292 


4.53 


4.683 


4.900 


5.077 


5.393 


5.742 


17 


4.405 


4.646 


4.803 


5.027 


5.21 


5.534 


5.893 


18 


4 519 


4.768 


4.932 


5.157 


5.344 


5.676 


6.045 


19 


4.63 


4.885 


5.052 


5.286 


5.476 


5.819 


6.196 


20 


4.74 


5.202 


5.171 


5.412 


5.606 


5.956 


6.342 


21 


4.846 


5.115 


5.289 


5.532 


5.735 


6.097 




22 


4.955 


5.228 


5.403 


5.649 


5.86 






23 


5.054 


5.333 


5.514 


3.463 








24 


5.156 


5.44 


2.248 










25 


5.248 














26 
















27 
















28 
















29 
















30 
















31 






- 










32 
















33 
















34 
















35 
















36 
















37 
















38 
















39 
















40 
















41 
















42 
















43 

















OF LIFE INSURANCE. 175 

TABLE NO. 5.— (Continued.) 

Showing the Maximum Rates for $1,000 Insurance for all Ages 
Between 25 and 60 Years, from the First Year of Insur- 
ance to the End of the Probability of Life. 



Age of 
Entry. 


53 


54 


55 


56 


57 


58 


59 


60 


Years 


Prob. of 


Prob. of 


Prob. of 


Prob. of 


Prob. of 


Prob. of 


Prob. of 


Prob. of 


of 


Life. 


Life. 


Life. 


Life. 


Life. 


Life. 


Life. 


Life. 


Insur. 


i9 l / 2 Yrs. 


18^ Yrs. 


18 Yrs. 


i75iYrs. 


i6^Yrs. 


1 6 Yrs . 


15 Yrs. 


14 Yrs . 


1 


3.911 


4.111 


4.331 


4.566 


4.826 


5.015 


5.428 


5.901 


2 


4.049 


4.254 


4.481 


4.723 


4.994 


5.189 


5.617 


6.105 


3 


4.171 


4.389 


4.618 


4.871 


5.149 


5.35 


5.79 


6.293 


4 


4.294 


4.511 


4.754 


5.014 


5.297 


5.506 


5.959 


6.477 


5 


4.431 


4.663 


4.907 


5.174 


5.469 


5.682 


6.149 


6.685 


6 


4.529 


4.763 


5.016 


5.292 


5.588 


5.81 


6.285 


6.833 


7 


4.649 


4.886 


5.145 


5.426 


5.734 


5.958 


6.448 


7.007 


8 


4.771 


5.017 


5.283 


5.571 


5.891 


6.12 


6.621 


7.198 


9 


4.897 


5.149 


5.419 


5.714 


6.040 


6.256 


6.792 


7.382 


10 


5.026 


5.283 


5.564 


5.871 


6.206 


6.446 


6.974 


7.582 


11 


5.166 


5.428 


5.719 


6.031 


6.374 


6.624 


7.168 


7.792 


12 


5.317 


5.588 


5.885 


6.209 


6.560 


6.816 


7.375 


8.019 


13 


5.472 


5.749 


6.053 


6 386 


6.746 


7.01 


7.587 


8.247 


14 


5.617 


5.906 


6.221 


6.563 


6932 


7.206 


7.797 


8.479 


J 5 


5.774 


6.066 


6.389 


6.737 


7.123 


7.406 


8.01 




16 


5.931 


6.234 


6.565 


6.923 


7.317 


7.606 






17 


6.086 


6.397 


6.737 


7.106 


3.754 








18 


6.246 


6.560 


6.913 


1.823 










19 


6.391 


5.046 














20 


3.272 
















21 


















22 


















23 


















24 


* 
















25 


















26 


















27 


















28 


















29 


















30 


















31 


















32 


















33 


















34 


















35 


















36 


















37 


















38 


















39 


















40 


















41 


















42 


















43 










1 





176 THE THREE SYSTEMS 

The above maximum rates merely form the basis from which 
the actual rates necessary to pay the death losses of the company 
are obtained, If the death losses should equal the American 
Table of Mortality Experience, then it would require 46 t 1 q% 
annually of the above maximum, according to the age and policy 
years of members, to pay the losses; but since the actual experi- 
ence of the company is considerably below the American Table, 
it requires a less per cent. In fact, in an actual company, where 
selection is practiced, the amount necessary to pay the losses 
in a year will seldom exceed 40% of the maximum given in Table 
No. 5. 

Since the term of probable life covers the productive years of 
the insured, during which the entire expense of carrying life 
insurance should be borne, the Fouse Plan provides for loading 
the actual mortality percent, of the maximum required to pay 
the losses with a per cent, called Contingent Fund Loading:, 
which will, during the probable life term, if no portion is used to 
reduce the payments of the member, amount to enough money to 
render the policy thereafter self- sustaining", or, if the member 
prefers, he can surrender his policy , and the money will be paid to 
him as a disability benefit, he then having passed the chance 
mortality period and entered the deterioration period. The Con- 
tingent Fund Loading, together with its accretions necessary to 
accomplish this, meaning to render Ihe policy self-sustaining or 
paid up, after the lapse of the term of probable life, equals about 
33%% of the actual death losses. Hence, the actual cost of 
insurance on the Indemnity Reserve Plan amounts to 40% of the 
maximum given in Table No. 5, according to age and policy 
years, plus % of such 40% for the contingent fund, plus expense 
dues of $3 per $1,000 insurance. To illustrate : On the basis of 
46^0$ of the maximum, it requires, at age 50, as will be seen by refer- 
ence to Table No. 4, the first year $15.43 for mortality, y z of this 
sum, or $5.14 for the contingent fund, and $3 expense dues, making 
the total cost the first year of policy $23.57. If we take the sixth 
year of policy at the same age, we find, by referring to Table Nc. 4, 
that the mortality cost will be $17.87, adding l /$, or $5.96, for con- 
tingent fund, and $3.00 for expenses, we get a total cost of $26.83. 



THE EQUATION RATE OF THE FOUSE PLAN. 

To commute the natural rates indicated in the preceding 
tables, being 46^% of the maximum given in Table No. 5, our 
first step is to find at the start the value of a unit of money pay- 
able at the beginning of each year, and every year of the term, 
for which the calculation is to be made, discounting at the rate 



OF LIFE INSURANCE. 



177 



of 4% interest, and by the chance of its being paid; that is, of 
the insured remaining in the company to pay it. The first unit, 
being payable in advance, is an undiminished unit; the second 
and all others during the term being only payable contingently, 
must be further diminished by being multiplied by the decimal 
(for example, see column A of Table No. 6) expressing the chance 
of the insured remaining in the company. To illustrate: Let us 
assume to insure 1,000 persons aged 60. By reference to the 
Decrement Table, which is the American Mortality Experience 
Table, and the lapse experience of 30 American offices combined 
(see pages 122 and 125 of Fouse's Life Insurance Manual) we find 
that the probability that each insured will pay the premium the 
beginning of the second year is ^rV^--. The present value 
of $1 payable at the end of the year, at 4% discount, is .9615; 
hence "Woo-X- 9615=. 81573 (see column A, Table No. 6) the 
present value of the contingent annuity payment of $1 from 
each of the insured the beginning of the second year. The pres- 
ent value of $1 contingent, multiplied by the natural rate of the 
Fidelity (see column B, Table No. 6) being 46^ % of its maximum 
liability, or $28.14, gives the present value of the natural rate 
(see column C, Table No. 6) or $22.9546. A similar calculation 
is made for every year of the term, as will be seen from the fol- 
lowing table: 

TABLE NO. 6. 
Age 60. 





A 


B 


C 


Years. 


Present Value of 
$i Contingent 


46 1-10 per cent of 
Fidelity's Maxi- . 


Present Value of 
46 1-10 per cent 
of Fi d elity's 
Maximum 


* 


Annuity. 


mum Liability. 


1 


$1.00000 


27.20 


$27.20 


2 


.81573 


28.14 


22.9546 


3 


.69901 


29.01 


20.2783 


4 


.61483 


29.86 


18 3588 


5 


.54626 


30.83 


16.8411 


6 


.47873 


31.50 


15.0800 


7 


.42665 


32.30 


13.7808 


8 


.38870 


33.18 


12.5653 





.33985 


34.03 


11.5651 


10 


.30292 


34.95 


10.5871 


11 


.26690 


35.92 


9.5870 


12 


.23817 


36.96 


8.8028 


13 


.21032 


38.03 


7.9985 


14 


.18025 


39.09 


7.0460 




$6.49832 


$202.6454 



Having thus found the present value of all the natural pre- 
miums of the Fidelity per $1,000 insurance during the probable 
life of a person aged 60, and having also the present values of all 



178 THE THREE SYSTEMS 

the units or contingent annuity, it necessarily follows that aS 
this latter sum is to a unit, so is the single premium to the com- 
muted annual premium for the term of probable life. That is, 
as 6.49832 : 1 :: 202.6454 : 31.18. The latter sum being paid 
yearly in advance is the equivalent of the natural rate, or 46^0% 
of the maximum, for age 60, during probable life, commencing at 
$27.20 the first year, and ending the last, or fourteenth year, at 
$39.09 (see column B, Table No. 6). But the $31.18 constitutes 
simply the Equation Rate for $1,000 insurance during the prob- 
able life term of 14 years, and in order to make provision to con- 
tinue the insurance beyond the probable life term, the equation of 
the natural rates must be loaded with a sum, on the endowment 
principle, sufficient to equal a single net premium at the expira- 
tion of the probable life term. The whole life equation rate of 
the Fouse Plan operated by the Fidelity provides for an accumu- 
lation of $600 to each $1,000 insurance, for the benefit of each 
member surviving the term of probable life, which may be 
applied by the member as a single premium to carry his insur- 
ance, or it may be withdrawn as a disability benefit by surrender- 
ing the policy. Hence, we take the present value of $600 pay- 
able at the end of the year, or $576.92, and multiply it by the 
present value of the contingent annuity of $1 payable at the 
beginning of the last year of life probability, or .18025 (see H x + k 
Table No. 7), and to the product thus obtained add the sum of 
the present values (column C, Table No. 6) of 46 T 1 5 % of the 
Fidelity's Maximum Rate, for all the years of life probability, 
making 306.6352. And as 6.49832 : 1 : : 306.6352 : 47.18, the 
commuted annual rate for $1,000 insurance, including an accu- 
mulation of $600 during the term of probable life. 

The process df equating the natural rate, or 46^% of the 
maximum given in Table No. 5 for term of 10 years, 20 years, 
probable life, or whole life, will be fully explained in the alge- 
braic expressions which follow. 

NOTATION. 

x=Age at Entry. 

g=10 Year Term Insurance. 

h=20 Year Term Insurance. 

k = Probable Life Term. 

F=Value of accumulations at end of t years ; and therefore, 
k+f =Whole Life Term. 

a x = Present Value of $1 Contingent Annuity ; and therefore, 

^x+g= Present Value of $1 Contingent Annuity at end of 10 
years from X. 

a x + h = Present Value of $i Contingent Annuity at end of 20 
years from X. 

a x + k =Present Value of $1 Contingent Annuity at end of prob» 
able life. 



Otf LIFE INSURANCE. 



179 



H x + k =Present Value of $1 Contingent Annuity for last year of 
probable life. 

O =Present value of 46- 1 1 -# of fidelity's Maximum at end of c 
years. 

O h =Present Value of 46 T V$ of Fidelity's Maximum at end of d 

years. 

O k =Present Value of 46 T V# of Fidelity's Maximum at end of t 
years. 

O k + f =Present value of 46 T 1 ^ of Fidelity's Maximum for whole 
life term (meaning P+an accumulation of $600). 

n=Net Rate of Premium. 

B=Expense Dues of $4 per $1,000 Insurance ; and therefore, 

H + B=Gross Rate or Premium. 



TABLE No. 7, 



X 


a x + g 


a x + h 


a x + k 


° g 


25 


4.28751 


5.78663 


7.08849 


29.9849 


26 


4.35749 


5.88825 


7.17268 


31.7569 


27 


4.42747 


5.98987 


7.25687 


33.5289 


28 


4.49745 


6.09149 


7.34106 


35.3009 


29 


4.56743 


6.19311 


7.42525 


37.0729 


30 


4.63741 


6.29473 


7.50944 


38.8449 


31 


4.70739 


6.39635 


7.59363 


40.6169 


32 


4.77737 


6.49797 


7.67782 


42.3889 


33 


4.84735 


6.59959 


7.76201 


44.1609 


34 


4.91733 


6.70121 


7.84620 


45.9329 


35 


4.98733 


6.80282 


7.93039 


47.7053 


36 


5.04506 


6.89223 


7.97073 


50.5972 


37 


5.10279 


6.98165 


8.01107 


53.4891 


38 


*5. 16052 


7.07106 


8.05141 


56.3810 


39 


5.21825 


7.16048 


8.09175 


59.2729 


40 


5.27598 


7.24989 


8.13209 


62.1648 


41 


5.33371 


7.33931 


8.17243 


65.0567 


42 


5.39144 


7.42872 


8.21277 


67.9486 


43 


5.44917 


7.51814 


8.25311 


70.8405 


44 


5.50690 


7.60755 


8.29345 


73.7324 


45 


5.56463 


7.69696 


8.33384 


76.6245 


46 


5.57307 


7.69668 


8.25885 


81.2897 


47 


5.58151 


7.69640 


8.18386 


85.9549 


48 


5 58995 


7.69612 


8.10887 


90.6201 


49 


5.59839 


7.69584 


8.03388 


95.2853 


50 


5.60683 


7 69556 


7.95889 


99.9505 


51 


5.61527 


7.69528 


7.88390 


104.6157 


52 


5.62373 


7.69499 


7.80890 


109.2811 


53 


5.62110 




7.64508 


116.7723 


54 


5.61847 




7.48126 


124.2630 


55 


5.61584 




7.31744 


131.7547 


56 


5.61321 




7.15362 


139.2459 


57 


5.61058 




6.98980 


146.7371 


58 


5.60795 




6.82598 


154.2283 


59 


5.60532 




6.66216 


161.7195 


60 


5.60268 




6.49832 


169.2111 



180 



THE THREE SYSTEMS 

TABLE No. 7.— Continued. 



X 


o h 


P k 


H x + k 


o k+f 


k 


25 


44.1227 


60.0754 


.02189 


72.7041 


43 


26 


46.8007 


62.9935 


.02408 


76.8857 


42 


27 


49.4787 


65.9116 


.02627 


81.0672 


41 


28 


52.1567 


68.8297 


.02846 


85 2488 


40 


29 


54.8347 


71.7478 


.03065 


89.4303 


39 


30 


57.5127 


74.6659 


.03284 


93.6119 


38^ 


31 


60.1907 


77.5840 


.03503 


97.7935 


37 f- 


32 


62.8687 


80.5021 


.03722 


101 9750 


37 


33 


65.5467 


83.4202 


.03941 


106.2566 


36 


34 


68.2.47 


86.3383 


.04160 


110.3381 


35 


35 


70.9025 


89.2567 


.04386 


114.5604 


34 


36 


75.3613 


93.2936 


.04758 


120.7634 


38-|- 


37 


79.8202 


97.3305 


.05130 


126.9264 


32^ 


38 


84.2790 


101.3674 


.05502 


133.1095 


32 


39 


88.7379 


105.4043 


.05874 


139.2925 


31 


40 


93.1967 


109.4412 


.06246 


145.4756 


30 


41 


97.6556 


113.4781 


.06618 


151 6586 


29 


42 


102.1144 


117.5150 


.06990 


157.8517 


28^ 


43 


106.5733 


121.5519 


.07362 


164.1246 


27^ 


44 


111.0321 


125.5888 


.07734 


170.2077 


27 


45 


115.4910 


129,6260 


.08115 


176.4430 


26 


46 


122.1804 


134.7717 


.08583 


184.3887 


25 


47 


128.8698 


139.9174 


.09051 


192.1344 


24 


48 


135.5592 


145.0631 


.09515 


199 9570 


23f 


49 


142.2486 


150.2088 


.09987 


207.8258 


22 | 


50 


148 9380 


155.3545 


.10455 


215.6714 


22 


51 


155.6274 


160.5002 


.10923 


223.5171 


21 


52 


162.3167 


165.6462 


.11391 


231.3631 


20 


53 




170.2711 


.12220 


240.7717 


mi 


54 




174.8960 


.13049 


250.1782 


im 


55 




179.5209 


.13878 


259.5858 


18 


56 




184.1458 


.14707 


268.9934 


1?M 


57 




188.7707 


.15536 


278.4009 


16K 


58 




193.3936 


.16365 


287.8085 


16 


59 




198.0205 


.17194 


297.2161 


15 


60 




202.6454 


.18025 


306.6352 


14 



OF LIFE INSURANCE. 181 

EXAMPLES ILLUSTRATING THE USE OF THE 

FORMULA. 

First Example— Age 45— lO Year Term Insurance. 



Formula =tt + B 



o=76.6245 M " 

Solution =13.77+4=117.77 Premium. 



II + B 

=1! 

a , =5.56463 

Second Example— Age 45— 20 Year Term Insurance. 



Formula =tt + B 

a x + h 

II + B 



o k =115.4910 " " 



Solution =15+4=$19.00 Premium. 

a x+h =7.69696 



Third Example— Age 45— Probable Life Term. 



Formula =tt + B 

a x + k 

II + B 

o k =129.C260 " " 

Solution =15.55 + 4=$19.55 Premium. 

a z+k = 8.33384 



Fou'th Example— Age 45— Whole Life Term. 

°k + f 
Formula = y + b 

a x + k 

II + B 
o k + f =l 76.4430 " '• 

Solution =21.17 + 4=$25.17 Premium. 

a x+k = 8.333844 



182 



THE THREE SYSTEMS 

TABLE NO. 8. 



Annual Equation Rates of Fouse Plan per $1,000 Insurance 
Including Expense Charge of $4.00. 



Age. 


io- Year Term. 


20-Year Term. 


Probable Life 
Term. 


Whole Life 
Term. 


18 


9.24 


9.74 


10.35 


11.47 


19 


9.49 


10.01 


10.67 


11 85 


20 


9.74 


10.28 


10.97 


12.26 


21 


9.99 


10.55 


11.28 


12.65 


22 


10.24 


10.82 


11 57 


13.07 


23 


10.49 


11.09 


11.86 


13.45 


24 


10.74 


11.36 


12.17 


13.86 


25 


10.99 


11.63 


12.47 


14.26 


26 


11.29 


11.95 


12.78 


14.71 


27 


11.57 


12.26 


13.08 


15.17 


28 


11.85 


12.56 


13.23 


15.61 


29 


12.09 


12.85 


13.66 


16.04 


30 


12 38 


13.14 


13.94 


16.46 


31 


12.63 


13.41 


14.21 


16.87 


32 


12.83 


13.68 


14.48 


17.28 


33 


13.11 


13.93 


14.74 


17.68 


34 


13.31 


14.18 


15.00 


18.06 


35 


13.57 


14.42 


15.25 


18.44 


36 


14.02 


14.93 


15.70 


19.15 


37 


14.48 


15.43 


16.14 


19.84 


38 


14.92 


15.92 


16.59 


20 53 


39 


15.35 


16.39 


17.02 


21.21 


40 


15.59 


16.86 


17.45 


21.88 


41 


16.19 


17.31 


17.88 


22.43 


42 


16.60 


17.75 


18.30 


23.22 


43 


17.00 


18.18 


18.67 


23.88 


44 


17.38 


18.60 


19.14 


24.52 


45 


17.77 


19.00 


19.55 


25.17 


46 


; 18.59 


19.87 


20.32 


26.32 


47 


19.40 


20.74 


21.09 


27.47 


48 


20.20 


21.61 


21.89 


28.65 


49 


21.02 


22.48 


22.70 


29.86 


50 


21.83 


23.35 


23.53 


31.09 


51 


22 63 


24.22 


24.36 


32.35 


52 


23.43 


25.09 


25.21 


33.62 


53 


24.75 




26.27 


35.49 


54 


26.12 




27.38 


37.44 


55 


27.46 




28.53 


39.47 


56 


28.70 




29.74 


41.60 


57 


30.15 




31.07 


43.82 


58 


31.50 




32 33 


46.16 


59 


32.85 




33.72 


48.61 


60 


34.22 




35.18 


51.18 



OF LIFE INSURANCE. 183 

CORPORATE POWERS, BY-LAW AND CONTRACT 
PROVISIONS, OP THE FIDELITY MUTUAL 
LIFE ASSOCIATION, OF PHILADELPHIA. 

The charter is perpetual, and the company is or- 
ganized on a purely mutual principle; members are 
liable for their pro rata of the death losses during the continu- 
ance of their policies, in the proportion of their ages and respect- 
ive interests. 

The Board of Directors, limited to thirteen, are elected by the 
policy holders annually, and they in turn elect the officers. 

The Treasurer is under bond, guaranteed by a surety company 
having a half million dollars capital, to cover the money passing 
through his hands. 

No person is eligible for membership whose age nearest birth- 
day is more than 60 years. 

Policies are limited to $25,000, and when the insured is more 
than 50 years old to $10,000, and when on the life of a female to 
$5,000. 

All calls and dues are payable at fixed periods, and must be 
paid at the time specified in the policies and notices ; a failure to 
receive notice, change of residence, or postoffice address, must 
be promptly reported by members to the Treasurer of the 
Association. 

Lapsed policies may be restored upon the approval of the 
Medical Director and President, provided the holders give evi- 
dence of good health and reasonable assurances that they will 
thereafter make prompt payment. 

Upon the 'death of a member, written notice must be given 
forthwith to the President. 

All policies are payable within 90 days from the receipt of 
satisfactory proof of the death of the insured. 

A misrepresentation, false or fradulent statement in the appli- 
cation, vitiates the policy, until it has been in force ^.Ye years, 
then it becomes incontestable. 

Any member is at liberty to travel in all healthy parts of the 
inhabited and civilized world without vitiating his policy. 

If a member be engaged in a hazardous employment, and 
death ensue through such hazard, the Association reserves the 
right to scale the policy from 5 to 25%, as the circumstances may 
warrant ; but on account of such reservation, the member is not 
required to pay an extra premium, nor to obtain a permit to 
engage in a hazardous employment. 

No member can change the beneficiary named in his policy, or 
make an assignment of the same, without first securing the ap- 
proval of the President. 

The tax imposed by the laws of any State must be paid by the 



184 THE THREE SYSTEMS 

members residing in such State in addition to the regular payments 
stipulated in their respective contracts. 

Each applicant for membership must pay to the Association, or to 
its accredited agent, to cover initial expenses, $8 on the first $1,000 
and $5 on each additional $1,000 insurance applied for. 

On the Indemnity Reserve Plan, the expense dues, after 
the advance payment has been made, are $3 per $1,000 yearly. The 
right is reserved in the by-laws to add to the mortality element of 
payments a collection fee, not exceeding 15$. The expense dues on 
this plan are payable in equal parts with the mortuary and contingent 
fund calls in March, July and November. 

On the Equation Rate Plan, the expense dues are limited 
to the mortality savings the first five years and $4 per $1,000 yearly, 
and are paid together with or as a part of the premium. 

The Mortuary Fund of the Association is held as a special 
trust by a legalized Trust Company, and the Equation and Con- 
tingent Funds are invested under the direction of the Board of 
Directors for the exclusive benefit of members. 

After policies have been in force seven years, and while still in 
force, they may be surrendered, and commuted paid-up policies will 
be issued for such an amount as the money credited to the member, 
less an equitable surrender charge, will purchase. 

Policies issued on the whole life plan, and running through the 
term of probable life, will then have a sum of money accumulated to 
their credit, which will be sufficient to render them thereafter prac- 
tically self-sustaining, or may be exchanged for a disability benefit of 
about $600 for every $1,000 insurance. 

By virtue of the contracts made with the insured, limiting therein 
the expense of management to the annual dues above given, the in- 
surance funds are kept separate and distinct from the expense fund, 
and are held absolutely for the benefit of members. 

The Fidelity, under the law of its incorporation, and the laws of 
the several States under which it is doing business, is not required to 
maintain the legal reserve, and in lieu of this rather expensive re- 
quirement, its policyholders are liable for the actual losses of the 
Association, which cannot, without a revulsion in the laws of nature, 
exceed 50$ of the maximum set forth in Table No. 5. And since 
the aggregate of the yearly liability of each insured equals 100$, or 
the face value of his policy, there can be no doubt as to the ability of 
the Association to make good its contracts. Its entire accumulation, 
by reason of the contracts of ihe members being made liable for the 
losses, is held as a surplus and not as a reserve, thus avoiding the 
technical liability which has wrought ruin to so many life companies. 

The probable cost of the Fidelity's insurance may be anticipated 
by the members, as in the case of those insuring on the Equation 
Plan, the rates of which are scientific, and according to insurance ex- 
perience ample to pay all losses, yet the members are justly liable, as 



OF LIFE INSURANCE. 185 

they should be, for deficiencies, should any occur, in the insurance 
fund, thus guaranteeing the full payment of all policies. With this 
wise precaution, receiverships, which have absorbed over $50,000,- 
000 of insurance money in the United States, need have no terror for 
members of the Fidelity. 

In every legitimate life insurance company, the insured must ex- 
pect to pay the money necessary to carry the insurance, and to pay 
all policies in full, and in a company like the Fidelity, which limits 
the expense of management in its contracts, and which furnishes the 
insurance at greatly reduced rates, there can be no valid objection to 
its reserving the right to call upon its members to make good de- 
ficiencies, should any occur in the insurance fund. 

DUPLEX ASSURANCE BOND OF THE FIDELITY 

MUTUAL. 

(Copyrighted.) 
During the year 1890 the author of the Fouse Plan perfected a 
most important addition to his already popular system of life insur- 
ance. He recognized the fact that many prosperous persons prefer, 
during their producing years, to pay up their insurance in 10, 15 or 
20 years, so as to be done with it, provided they can do so with 
safety. A good many have, however, been deterred from doing this 
because millions of dollars have been paid in advance for insurance, 
which, by reason of the failure of the companies, was never fur- 
nished. It should be remembered that such failures were purely 
technical and not commercial. The life insurance companies in the 
United States which failed had assets at the time amounting to over 
$100,000,000, Their actual liabilities amounted to less than 10% of 
the assets, while the technical liabilities, which caused the failures, 
exceeded the assets. To overcome this difficulty, and at the same 
time enable persons to pay for their insurance within a term of years, 
the plan of the Duplex Assurance Bond was devised. As its name 
implies it is a combination of an Assurance Policy and an Investment 
Bond ; the former is issued by the Fidelity Mutual Life Association, 
and the latter by the Lombard Investment Company (paid-up capital, 
$4,000,000). The bond has a fixed surrender value for every year of 
its term after the third, and at the end of the term such value is the 
equivalent of a single premium at the then age of the insured, with 
the proceeds of which the policy is thereafter sustained, unless the 
holder then elects to surrender both contracts for their cash value 
The investment or cumulative bonds are secured by the deposit of 
mortgage securities with the Union Trust Company of Philadelphia, 
as Trustee, so that the payments made by policyholders of the 
Fidelity to protect their insurance in the future are absolutely secured. 
The failure of either or both corporations would not entail the loss of 
a penny, assuming that real estate mortgages for 40$ of the value of 
the property are good security. The advantages of the Duplex As- 
surance Bond as compared with limited life policies are. first, a 
reduction of about 20$ in the premium ; second, all payments in ex- 
cess of the current cost of insurance are converted into securities and 
held in trust by a legalized trust company free from the risk and con- 
tingencies of both the life insurance and investment business ; third, 
to get present protection there is no hazard in paying for future pro- 
tection ; fourth, if bond be surrendered, the cash value according to 
term and age, is from 25$ to 50$ greater ; fifth, the failure of either 
the insurance or investment company would not affect the contract of 
the surviving company — it would be carried out ; while, if the insur- 
ance and investment were combined under one contract or policy, the 
failure of the company issuing it would render both worthless. 



186 



THE THREE SYSTEMS 



The following table gives the combined yearly cost of present and 
future protection or investment per $1,000 of insurance, and the 
guaranteed value of the bond end of term : 

DUPLEX ASSURANCE BOND. 





10-Pa^ 


fMENT. 


15-Pa^ 


r'MENT. 


2°-Payment. 


AGE. 


Yearly 

Rate 

Per $1,000 


Cash Value 

of Bond 

Part End 

of 10th 


Yearly 

Rate 

Per $1,000 


Cash Value 

of Bond 

Part End 

of 15th 


Yearly 

Rate 

Per $1,000 


Cash Value 

of Bond 

Part End 

of 20th 




Insurance. 


Year. 


Insurance. 


Year. 


Insurance. 


Year. 


18 


$36.51 


$355,02 


$27.58 


$410.79 


$22.95 


$474.55 


19 


36.90 


360.47 


27.87 


416.97 


23.17 


481.18 


20 


37.36 


365.64 


28.17 


423.13 


23.43 


488.58 


21 


37.80 


371.37 


28.49 


429.55 


23.69 


496.00 


22 


38.25 


376.93 


28.82 


436.20 


23.97 


503.79 


23 


38.74 


382.82 


29.17 


4i2.86 


24.27 


511.98 


24 


39.24 


388.83 


29.53 


450.02 


24 58 


520.18 


25 


39.73 


394.98 


29.89 


457.18 


24.88 


528.75 


26 


40.26 


401.26 


30.31 


465.07 


25.21 


537.33 


27 


40.81 


407.97 


30.70 


472.73 


25.60 


546.30 


28 


41.39 


414.82 


31.14 


480.86 


25.99 


554.87 


29 


41.99 


421.80 


31.61 


489.25 


26.41 


563.85 


30 


42.64 


429.21 


32.10 


497.89 


26.86 


572.81 


31 


43.29 


436.90 


32.59 


506.77 


27.32 


581.39 


32 


43.98 


414.58 


33.12 


515.66 


27.80 


590.36 


33 


44.70 


452.82 


33.70 


524.53 


28.34 


599.32 


31 


45.49 


461 21 


34.30 


533.42 


28 90 


607.91 


35 


46.27 


470.01 


34.91 


542.55 


29.39 


616 88 


36 


47.11 


478.67 


35.59 


551.67 


30.10 


625.45 


37 


47.98 


487.75 


36.28 


560 80 


30.74 


634.03 


38 


48.91 


496 83 


37.03 


570.18 


31.44 


642 61 


39 


49.86 


505.92 


37.78 


579.06 


32.16 


650.80 


40 


50.88 


515.13 


38.61 


588.19 


32.97 


658.99 


41 


51.91 


524.36 


39.44 


597.31 


33.78 


666.39 


42 


53.00 


533.58 


40.35 


606.21 


34.67 


673.80 


43 


54.15 


543.08 


41.26 


614 84 


35 37 


681.21 


44 


55.37 


552.45 


42.39 


623.48 


36.34 


687.84 


45 


56.61 


561.67 


43.47 


632.11 


37.33 


694.08 


46 


57.96 


571.02 


44.61 


640.49 


38.44 


699.54 


47 


59.35 


580.24 


45.84 


648.63 


39.43 


705.39 


48 


60.82 


589.47 


47.15 


656.28 


40.93 


709.68 


49 


62.41 


598.41 


48.58 


663 44 


42.41 


713.58 


50 


64.08 


607 21 


50.13 


670.59 


44.02 


716.31 


51 


65.89 


61616 


51.81 


676.77 






52 


67 79 


624.81 


53 61 


682.68 






53 


69.76 


632.35 


55.55 


687.37 






54 


71.88 


640 19 


57.75 


692.05 






55 


74.18 


648.01 


60.01 


695.52 






56 


76.59 


654.44 










57 


79.19 


661.00 










58 


81.95 


666.59 










59 


84.93 


671.48 










60 


88.14 


675.96 











Note .— In addition to the above guaranteed surrender values of the bonds 
issued by the Lombard Investment Companv, it is estimated that the deferred 
dividends on the special term policy of the Fidelity will equal on the ten-payment 
15$, on the fifteen-payment, 22%, and on the twenty-payment, 31$ of the total 
premiums paid. 



OF LIFE INSURANCE. 187 

The Fidelity Mutual Life Association is ably managed ; is in a 
highly prosperous financial condition ; issues plain, untechnical policy 
contracts ; guarantees economical management by its limitation in 
expenses ; clearly defines the rights of policyholders in its by-laws ; 
insures its members for a term of years, or for life ; affords undoubted 
security to the insured ; furnishes the insurance at its actual cost; 
gives its members the privilege of paying for losses as they occur, or 
of anticipating their payments for the sake of convenience, on an 
equitable basis ; protects the insured in old age, and the family dur- 
ing his producing years ; and altogether is not only a representative 
Association, but one of the best life insurance corporations in this 
country. 



188 THE THREE SYSTEMS 

THE HARPER PLAN. 

Under date of Nov. 10, 1885, a communication was addressed to 
Mr. Harper, of New York City, asking him to define in as brief a 
manner as would be consistent, his plan of assessment insurance. In 
reply, Nov. 18th, the following communication was received ■ 

Mervin Tabor, Esq., 

Actuary Ins. Dept. of Illinois : 

The system of Life Insurance original with and employed by the Mutual Re- 
serve Fund Life Association, comprises these distinct and peculiar features : 

The collection by periodical installments at intervals of sixty days, of the 
natural premiums of the American Table of Mortality, or such a proportion thereof 
as may be required to discharge current death claims. 

The collection, at the same time and in the same way, of an amount equal to 
one-third of the above described premiums, and the funding of the same as sur- 
plus, or reserve fund, which can be applied in only two ways, to wit : to be drawn 
upon in case the mortality experienced should exceed that predicted by the Amer- 
ican Table and after fifteen years to be used for the same purpose in lieu of the 
allotted contributions of surviving and persistent member?. 

The interest earnings and tontine profits accruing from this fund are applied 
each year to the payments of current death charges ; thereby reducing the contri- 
butions of the members and retarding the otherwise unavoidable increase of the 
natural series of premiums. Very truly, 

[Signed] E. B. Harper, 

President. 

Provision for Limiting the Cost to the Maximum Rates 
at Age of Entry. 

The following resolution was offered at the Annual Meeting of 
Members, held January 23, 1889, by General Isaac H. Shields, of 
Philadelphia. Pa., and, after full discussion, unanimously adopted : 

Whereas, The Mutual Reserve Fund Life Association was established upon the 
natural premium system of life insurance, which requires the members to pay 
simply their proportion of the death claims, with thirty-three per cent, additional 
thereto (which is equivalent to 25 per cent, upon the gross), which additional sum 
has for its object the creation of a reasonable surplus reserve emergency fund to 
provide against unforeseen contingencies, its foundation principles being in oppo- 
sition to accumulations of vast sums of money taken from the pockets of the 
policyholders ; and 

Whereas, The aforesaid surplus reserve emergency fund is rapidly increasing, 
and has already reached the enormous sum of $1,885,000 ; therefore 

Resolved, That in the event any sums are hereafter required for the payment of 
death claims, in excess of the sums realized from current bi-monthly mortuary 
premium calls at the maximum rates at age of entry, as established by the Associ- 
ation, that are applicable to the . death funds (which rates are based upon the 
American Tables of Mortality, with 33 per cent, loading for the Reserve Fund), 
the Board of Directors shall have power to pay such death claims in excess thereof 
front the current receipts that are applicable to the surplus reserve emergency 
fund, provided that said surplus reserve emergency fund shall always be main- 
tained at a sum not less than Two Million (2,000,000) Dollars ; but nothing in this 
resolution shall conflict with the provisions of the Constitution or By-Laws. 

Note. — While the Reserve Fund — appertained and set apart with the Trustee — 
could not be used except for the two purposes, as stated in the President's letter 
under date of Nov. 18, 1885. Yet, the by laws, or constitution and the policy 
contracts of the Mutual Reserve Fund Life Association provide that the current 
receipts from mortuary calls, could always be used in the payment of death claims 
or to the making up any deficit in the death fund account. That is to say, if the 



OF LIFE INSURANCE. 189 

existing approved death claims exceeded the receipts from the mortuary call, ap- 
plicable to the death fund, such approved death claims could be paid from the 
current receipts, applicable to the reserve or emergency fund. Thus in case of 
necessity the total current receipts could be used in the payment of the death 
claims, as contemplated by resolution adopted Jan. 23, 1889. 

Admission Fee. — The admission fee charged by the Association 
is, upon the 10 year plan, $8.00 for each $1,000 of insurance. 

Annual Dues. — The annual dues are $3.00 upon each $1,000 of 
insurance. 

The total payments are adjusted so that the first year's payment by 
the member for each $1,000 insurance, including admission fees, will 
equal only about the maximum amount required the second year. 

Applications. — The applications required for membership are 
similar to those in use by other well managed Life Insurance Com- 
panies. 

SAMPLE OF POLICY. 

Ten Years Distribution Deposit Policy.. 

free policy. no restriction as to travel, occupation or 

residence. 

MUTUAL RESERVE FUND LIFE ASSOCIATION 1 . 

In consideration of the answers, statements and agreements contained in the 
application for this policy of insurance, which are hereby made a part of this con- 
tract, and of the payment of dollars as a first payment, to 
be paid on or before the delivery of this policy, and the further payment of 
dollars, payable to the association within sixty (60) days 
from the date of this policy, for the general expense fund of the association, the 
Mutual Reserve Fund Life Association does hereby receive 

of , County of 

State of , as a member 

of said association ; and upon the condition of the payment of 

dollars and cents as a deposit in advance on account of 

mortuary premiums and dues, within thirty days from the first week day of the 
months of 

next ensuing, and of the payment, as hereinafter provided, within thirty days 
from the first week day of said months, in every year during the continuance of 
this policy, of the subsequent mortuary premiums and dues, there shall be pay- 
able to the legal representatives of said member, the sum of 

dollars, at the home office of the association in the city of New 
York, within ninety days after acceptance of satisfactory evidence to the associ- 
ation of the death of said member, made out as required upon its blank forms 
provided therefor ; subject to all the provisions, requirements and benefits stated 
on the second page of this policy, which are hereby made a part of this contract. 
If this policy of insurance shall have been in continuous force for three years 
from its date, it shall thereafter be incontestable except for fraud, non-payment of 
stipulated payments at the times and in the manner herein provided, or for mis- 
statement of the age of the member in the application therefor. 

In witness whereof, the said Mutual Reserve Fund Life Association has caused 
this agreement to be signed by its president or vice-president, and secretary or 
assistant secretary, at the city of New York, this day of 

, one thousand eight hundred and ninety. 

. President. 

_ _ Secretary, 

(self.) Examined by 



190 THE THREE SYSTEMS 

Provisions, Requirements and Benefits. 

I. This contract is not binding until both the first payment, including medical 
fees, is paid in cash hereon, and this policy delivered to said member, while in 
good health. No contract, alteration or discharge of contracts, waiver or for- 
feitures, nor granting of permits or credits shall be valid, unless the same shall be 
in writing, signed by the president or vice-president and one other officer of the 
association. 

II. No personal liability is incurred by becoming a member of this association. 
This contract is a. bi-monthly term insurance, renewable at the option of the mem- 
ber, before expiration, upon payment of mortuary premiums and dues at the 
times and in the manner herein provided. 

III. If any of the stipulated payments shall not be made on or before the date, 
as provided therefor in this contract, at the home office of the association in the 
city of New York, or to a duly authorized local treasurer of the association, fur- 
nished with a receipt signed by the president, secretary or treasurer of the associ- 
ation, then this policy shall expire and become null and void. All payments made 
hereon shall be forfeited to the association whenever this contract shall ter- 
minate. 

IV. Within thirty days from the first week day of the months of February, 
April, June, August, October and December of each year, after the first payment 
on account of mortuary premiums hereunder shall become due, there shall be due 
to the association for payment of death claims such an amount as its executive 
committee may assess, : s provided in the constitution or by-laws (including the 
amount required for reserve or emergency fund), which amount, together with the 
dues at the rate of $3 per annum per $1,000 of insurance hereunder, shall not 
exceed the maximum rates as per table endorsed hereon, according to the then age 
of each member. Rates for ages not included in said table shall be based upon 
the American Experience Table of Mortality. There shall be deducted from the 
deposits made in advance, on account of mortuary premiums and dues, at the 
respective succeeding bi-monthly dates above mentioned, such amounts as are 
then respectively due, and at the end of each respective year from the date when 
the first deposit is due hereunder, notice will be sent stating the then sum to be 
advanced on account of mortuary premiums and dues for each ensuing year, and 
showing the excess, if any, of last year's deposits on account in meeting the said 
bi-monthly assessment for mortuary premiums and for dues. The said sums on 
account for each new year (less said excess) shall be payable at the same dates as 
for the first year hereof. In the event of the death of the member all sums paid 
in advance for the then current year, after deducting all indebtedness, are return- 
able to the beneficiary.. 

V. All notices addressed to a member, or other person designated by said mem- 
ber, at the last post-office address appearing upon the books of the association, 
shall be deemed a sufficient notice, and affidavit of addressing and mailing the 
same according to the usual course of business of said association, shall be held to 
be conclusive proof of due notice to every person acquiring any interest here- 
under. And in the event of the non-receipt of a notice, it shall be, nevertheless, 
a condition precedent to the continuance of this policy, that a sum equal at least 
to the amount of the last preceding mortuary premium and dues paid, shall be 
paid said association within thirty days from the first week day of the month when 
due, and any deficiency in said amount shall be paid upon the demand of the asso- 
ciation. Notice that a mortuary premium and dues are payable to said association 
at the dates written on the first page of this policy in every year, is hereby given 
and accepted for all purposes. 

VI. Twenty-five percent, of the net receipts, as provided in the constitution or 
by-laws, from mortuary premiums paid under this policy shall be added to the 
reserve or emergency fund, for the exclusive benefit of the members ; and the net 
interest on the same, as it accrues, shall be placed to the credit of the death fund, 
to be used in providing for current death claims. The reserve or emergency fund 



OF LIFE INSURANCE. 191 

above $100,000 may be applied to the payment of claims in excess of the American 
Experience Tables of Mortality, or to making up any deficiency that may exist 
in the death fund. The total assets of the association, including the reserve or 
emergency fund and accretions thereon, and also the amount held or deposited in 
the death fund account, and the proceeds from the next mortuary call are hereby 
made liable for the payment of all benefits payable und r this policy, and the 
insurance hereunder is conditional thereupon. 

VII. After this policy shall have continued in force ten years, the actuary of 
the association will annually thereafter, while the same is in force, determine and 
credit thereto the equitable proportion to which this policy is entitled from its 
contribution to the reserve or emergency fund for the tenth respective year prior 
to said credit (including an equitable proportion of the contribution of those of 
the same class whose policies have terminated) ; which amounts so determined 
and credited may be used toward payment of future dues and mortuary premiums. 
In case of the death of the member the sum apportioned and standing to the 
credit of this policy, as determined by said actuary, in the reserve or emergency 
fund shall be paid to the beneficiary, in addition to the amount hereby insured. 

VIII. Provided this policy shall have been in continuous force for the period of 
fifteen years from its date, then, in that event, provided the member shall notify 
said association in writing at least one year before the expiration of said fifteen 
years, that he desires to surrender this policy and to have paid him in cash the 
equitable share of the surplus reserve or emergency fund accumulations in which 
this policy is entitled to participate ; then, after receipt of such written notice, as 
aforesaid, the actuary of said association will determine and credit to said member, 
upon the books of the association, the equitable proportion to which this policy is 
entitled by its contributions to the reserve or emergency fund, including the then 
equitable share of such reserve or emergency fund accumulations contributed 
thereto by members otherwise participating, whose policies have terminated by 
death, expiry and lapse, and after deducting any sums that may have been used or 
paid as per Section VII. of this policy, the remainder so determined by said 
actuary as aforesaid, and standing to the credit of such member upon the books of 
the association, shall at the expiration of said fifteen (15) years be paid in cash to 
said member, and this policy shall thereupon become null and void, and be surren- 
dered to said association. 

IX. Death of said member, caused by engaging in any violation of law, or by 
his own hand whether sane or insane, voluntary or involuntary, is not a risk 
assumed by this contract within three years from its date. 

X. Permission is hereby granted to said member to enter the military or naval 
service of the United States of America, but, should death of the member occur 
within six months from the date of wounds received while in such military or 
naval service, such death is not a risk assumed by the association in this contract, 
and, in such case there shall be payable, subject to all the conditions of this con- 
tract, only a sum equal to the amount of the premiums paid by said member. But 
in all other respects the occupation in the military or naval service is not prohibited 
and permission is hereby granted to enter the service of the militia in any State of 
the United States without restriction. 

XI. No assignment of this policy or change of beneficiaries, shall be valid 
without the consent of the association, and upon such terms as shall be approved 
by its Secretary or assistant Secretary. The association shall not be responsible 
for the validity of any assignment. The assignee or beneficiary must have an in- 
surable interest at the time of the assignment or transfer of this policy; claims by 
any creditor as beneficiary or assignee, shall not exceed the amount of the actual 
bona fide indebtedness of the member to him existing at the time claim matures 
hereunder, including premiums paid by said creditor hereon, with interest not to 
exceed the rate of six per centum per annum. A sworn statement in detail of said 
indebtedness must be rendered, and made out as required by the association. 

XII. . This contract shall be governed by and construed only according to the 
laws of the State of New York, the place of this contract being expressly agreed 



192 



THE THREE SYSTEMS 



to he the home office of said association in the City of New York ; and no action 
at law or suit in equity shall be maintained hereon, or recovery had, unless such 
action or suit is commenced within one year from the date of the death of said 
member. 

XIII. If this policy of insurance shall have been in continuous force for three 
years from its date, it shall thereafter be incontestable except for fraud, non-pay- 
ment of stipulated payments at the times and in the manner herein provided, or 
for misstatement of the age of the member in the application therefor, subject to 
the provisions hereunder, 

The following is printed on the back of the policy : 

This policy expressly provides that no personal liability shall be incurred by be- 
coming a member of this Association. 

Payments are at the option of the member, to continue only so long as the 
member may desire to keep his Policy in force. 

If this Policy shall have been in continuous force for three years from its date, 
it shall thereafter be incontestable, except for fraud, non-payment of stipulated 
payments at the times and in the manner herein provided, or for misstatement of 
the age of the member in the application therefor. 

The first payment required, including medical fees, is $8.00 for each $1,000 
insurance. 

Three dollars upon each $1,000 is to be paid to the Association for the general 
expense fund within 60 days from the date of the policy. 

The examination fee is to be paid by the applicant in addition to the $8.00 per 
$1,000, if the amount of insurance applied for is less than $3,000. 

$30,000 will only be written on parties not over 50 years of age ; on parties be- 
tween 50 and 55, not exceeding $20,000, and between 55 and 60, not exceeding 
$10,000. Applications for $15,000 or more must be recommended by two physicians 
on separate examinations. 

Maximum basis of mortuary premiums per $1,000 of insurance (including dues 
at the rate of $3 per $1,000 insurance . # 

Should the mortality of the Association in any year require an amount in excess 
of the sum provided for by these rates, together with the amount in the death 
fund and interest derived from the reserve emergency fund, such excess shall be 
paid from the reserve or emergency fund. 





Mortuary Premiums 




Mortuary Prem 


iums. 




Including Reserve 


or Emer- 




Including Reserve < 


or Emer- 




gency Fund and 


Dues. 




gency Fund and Dues. 


Age. 






Age. 








Bi-mon'ly 


Semi-An. 


Annual. 


Bi-mon'ly 


Semi-An. 


Annual. 


25 


$2 30 


$6.90 


$13.80 


43 


$2.87 


$8.61 


$17 22 


26 


2.31 


6.93 


13.86 


44 


2.93 


8.79 


17.58 


27 


2.32 


6.96 


13.92 


45 


2.99 


8.97 


17.94 


28 


2.34 


7.02 


14.04 


46 


3.07 


9.21 


18.42 


29 


2.36 


7.08 


14.16 


47 


3 17 


9.51 


19.02 


30 


2.37 


7.11 


14.22 


48 


3.28 


9.84 


19.63 


31 


2.39 


7.17 


14.34 • 


49 


3.41 


10.23 


20.46 


32 


2 41 


7.23 


14.46 


50 


3.56 


10.68 


21.36 


33 


2.44 


7 32 


14.64 


51 


3.91 


11.73 


23.46 


34 


2.46 


7.38 


14.76 


52 


4.28 


12.84 


25.68 


35 


4.49 


7.47 


14.94 


53 


4.66 


13.98 


27.93 


36 


2.52 


7.56 


15.12 


54 


5.03 


15.09 


30.18 


37 


2.55 


7.65 


15.30 


55 


5.41 


16.23 


32 46 


38 


2.59 


7.77 


15.54 


56 


5.78 


17.34 


34.68 


39 


2.63 


7.89 


15.78 


57 


6.16 


18.48 


36.96 


40 


2.70 


8.10 


16.20 


58 


6.53 


19.59 


39.1S 


41 


2.75 


8.25 


16.50 


59 


6.91 


20.73 


41.46 


42 


2.81 


8.43 


16.86 


60 


7.28 


21.84 


43.68 



The above rate includes Mortuary Premium, Reserve or Emergency Fund and 
Three dollars for Dues. 

Members will not be liable for mortuary calls made within three months from 
date of policy. 



OF LIFE INSURANCE. 193 

DEED OF TRUST WITH THE CENTRAL TRUST COM- 
PANY OF NEW YORK, AGREEMENT. 

This Agreement, made the 18th day of October, 1882, between the Mutual Re- 
serve Fund Life Association, a corporation duly organized under the Laws of the 
State of New York, and located in the City of New York, party of the first part, 
and The Central Trust Company of New York, a corporation duly chartered by 
said State, and located in said City of New York, as Trustee, party of the second 
part, 

Witnesseth : That, the said party of the first part, desiring to set aside a reserve 
fund for the exclusive benefit of its members, the said party of the second part, 
hereby agrees to receive the same and any future additions thereto, as Trustee, 
upon the following conditions : 

First. Such rate of interest shall be payable semi-annually by said party of 
the second part on the current deposits, to the credit of said reserve Fund, as shall 
be, from time to time, mutually agreed upon. 

Second. Said Trust Company shall, from lime to time, upon the written order 
of the President of said Association, invest said fund, or any portion of it, in such 
United States Bonds, State, County or City securities, or on such bond and mort- 
gage as shall be designated by the Board of Directors of said Association and 
approved by the President of said Trust Company Said securities shall be taken 
only in the name of said Association, but shall be held by said Trust Company 
subject to the conditions of this contract, and with power of attorney from said 
Association to collect the interest on the same. Any of such securities shall be 
sold by said Trust Company, upon the written order of the President of said Asso- 
ciation, accompanied by a certified copy of the vote of the Board of Directors of 
said Association authorizing such sale, and the proceeds shall be deposited to the 
credit of the Reserve Fund account with the said party of the second part. 

Third. The semi-annual interest on the current deposits and the interest on in- 
vestments shall, as it matures, be transferred to the credit of the death fund ac- 
count of the Association in such bank or trust company in New York City as shall 
be designated by the Board of Directors of said Association, provided that at the 
time of the manuring of an}^ such interest the constitution of the Association does 
not provide otherwise for its appropriation. 

Fourth. Upon receipt of a certified copy of a vote of the board of directors of 
said Association, authorizing the transfer of any portion of said reserve fund to 
the death fund account above mentioned, such transfer shall be made by said trust 
company. But in every case the resolution of the board of directors authorizing 
such transfer shall state that such transfer is authorized by sections 3 and 4 of 
Article XI. of the constitution of the association. 

Fifth. If the board of directors of said Association shall for any reason deem it 
to be expedient to order a transfer of the whole or any portion of said reserve fund 
including the investments, to any State insurance department or to any other trust 
company organized under the laws of the State of New York, such transfer shall 
be made by said party of the second part, provided, that no such transfer shall be 
made to any trust company until the delivery to said party of the second part of a 
certified copy of the order of the board of directors of said Association, author- 
izing the transfer, and a certified copy of the contract under which the designated 
trust company shall accept the transfer ; said contract to be indorsed as approved 
by one of the Justices of the Supreme Court of the district in which the principal 
office of said Association shall be located. 

Sixth. Said party of the second part shall be allowed a reasonable compensation 
for making investments of the reserve fund and collecting interest on the same, 
and for realizing on any of the securities of said fund, and for any authorized ex- 
penses of any litigation arising out of this contract, without fault of the party of 
the second part. 

Seventh. In case of a dissolution of the party of the first part, the entire reserve 
fund shall be divided among the then members of the Association, proportionally 



194 THE THREE SYSTEMS 

to the gross amount of assessments paid by said members* respectively to said 
Association, or shall be distributed in such other equitable manner as the courts 
shall direct. 

Eighth. The party of the second part is to be answerable only for its own de- 
fault, malfeasance or negligence in carrying out this agreement. 

In witness whereof, the party of the first part, and the party of the second part 
as trustee, have hereunto caused to be affixed their respective corporate seals, and 
their respectiv ; presidents and secretaries have hereunto set their hands this 18th 
day of October, 1882, 

MUTUAL RESERVE FUND LIFE ASSOCIATION, 

By E. B. Harper, President. 
[Seal.] F. T. Braman, Secretary. 

THE CENTRAL TRUST COMPANY OF NEW YORK, 

By H. F. Spaulding, President. 
[Seal.] Ch. P. Badcock, Secretary. 

President E. B. Harper Explains the Mutual Reserve's 

System. 

The foundation principles of the system of the Mutual Reserve 
Fund Life Association are : 

1st. To equitably apportion the premium charges among all the 
members. 

2d. To collect a sum applicable to the death fund equal only to 
the death claims paid, and is therefore known as the natural premium 
system. 

3rd. To collect a reserve or emergency fund that will always prove 
equal to any emergency by reason of excessive death claims in any 
year, without requiring the members to pay excessive premiums in 
such years. 

4th. To reduce the expense charges to the smallest amount possi- 
ble, consistent with an efficient management, and distribute or appor- 
tion said charges among the members, share and share alike, 
according to the amount of insurance held by each member. Thus 
ignoring the unjust percentage system. 

5th. To surround the reserve fund with all possible safeguards so 
that it shall not be used for any other purpose than for which it was 
collected. At the same time providing said fund with such safeguards 
as to virtually preclude any loss through malversation, or improper or 
unsafe investments. 

6th. To provide means by which, after a stated period of member- 
ship has elapsed, each of such members is credited with his share of 
the reserve fund. Thereby the Mutual Reserve Fund Life Association 
presents a plan by which its members not only secure their life insur- 
ance at actual cost, but through the accumulation of the reserve fund, 
actual security is obtained, and until used as an emergency, for the 
payment of excessive death claims or returned to the members, the 
reserve fund is surrounded with such safeguards for its protection as 
was never before introduced by any life insurance organization. 

7th. By collecting for the death fund account only the amount 
required for the payment of the death claims, the members of the 



OF LIFE INSURANCE. 195 

Mutual Reserve receive immediate benefit or credit, by reason of a 
small mortality on newly selected lives, also they receive immediate 
benefit by the reduction of mortality through expiring or lapsing of 
members who are old, who no longer require, or are unable to con 
tinue their membership, and through their discontinuance the mortality 
of the association is reduced. 

BANKERS' LIFE ASSOCIATION OF DES MOINES. 

Founded by E. A. Temple, Cashier of the First National Bank of 
Chariton, Iowa, 1879. 

This, the original association bearing this name, under a system 
peculiarly its own, was incorporated July 1, 1879, by a combination 
of about forty representative bankers for the purpose of supplying 
bank officers, bank clerks, and other business and professional men, 
with a class of insurance less expensive than that of old line companies, 
and more substantial in its nature than that supplied by co-operative 
institutions. Its subsequent success demonstrates that the promoters 
were fully justified in commending the system to the patrons of their 
banks. 

The overshadowing fault of the co-operative system was its 
inherent? weakness, and the remedy for this defect was, naturally 
enough, based upon the bankers' idea of ample security for 
the performance of the contract entered into, in the proportion of age 
and the amount of insurance carried. 

Acting upon this idea, it was required that each member should 
contribute a money guarantee that he would meet all calls for the 
purpose of paying death losses, and the fixed annual allowance for 
expenses, which being paid, entitles the beneficiary to a return of the 
guarantee as an addition to the $2,000 provided in the certificate of 
membership. 

These small contributions or pledges constitute the guarantee fund, 
which under the present stringent law of Iowa is guarded by invest- 
ment in real estate mortgages and municipal bonds and deposited (be- 
yond the control of managers) with the insurance department of this 
State where it is held as security for the payment of claims arising 
under the certificate of membership. It thereby becomes a veritable 
guarantee for each certificate issued by this association for the face 
value of two thousand dollars. This guarantee fund establishes the 
most complete equalization of ages ever presented to the public in 
modern insurance. 

The resources of this association may be likened unto the revenues 
of a county, which are based upon the valuation of the property 
owned by its citizens, and for the purpose of paying its obligations 
the supervisors levy a tax upon each according to the valuation of the 
property owned by him. For payment of this levy the property is 
held as security. 



196 



THE THREE SYSTEMS 



Its guarantee fund is the properly of the members and like the 
property of the citizen is the basis of its revenue. It has been said 
that the revenue of the State is the State, that all depends upon it — 
so with Life Insurance. Revenue secured by such pledges as make 
it solid is the dependence of all well-established institutions. As a 
further safe-guard, provision is made for a surplus fund, which 
is invaluable to every bank and business house. It is made up 
from lapsed guarantees, and interest on all the invested funds, 
and is set apart for the payment of the increased death rate, 
beyond ten deaths to the thousand members, thus providing for an 
emergency which may arise from epidemics. 

Another valuable feature of the system is that of designating na- 
tional, State and private banks as depositories of the association, and 
giving each bank a member of the board of counselors, to look after 
the interests of the association in its locality. This also enables the 
member to pay all calls at his home bank and thus obtain a voucher 
without waiting for returns by mail. 

The expenses of the association are provided for by membership 
fees and annual dues paid by each member pro rata, according to 
the amount of his guarantee deposit. These two items constitute the 
contingent fund for expenses which are limited to the actual cost for 
the transaction of the business by competent officials, who under the 
law of the State give ample bonds for the faithful performance of 
duty and for the security of the funds handled. 

Surplus Assets. 
Certificates of membership in this Association terminate if not re- 
newed by a quarterly payment due in January, April, July and Oc- 
tober of each year — hence the legal insurance liability of the asso- 
ciation, ascertained by the law of reserve and mortality applied to 
level premium companies is the sum of money required to pay claims 
during the current quarter. 

The sum thus required January 1, 1891, was $78,746.26 

The surplus assets on that date were 647,497.35 

Total assets $726,243.61 

The following is the estimated maximum yearly cost of $1,000 

life insurance in the Bankers' Life Association of Des Moines, la.: 



6 


Cost. 


6 


Cost. 


bJ3 


Cost. 


6 

bfi 


Cost. 


< 




< 




< 




<1 




18 


$6.30 


27 


$ 9.45 


36 


$12.60 


46 


$16.10 


19 


6.65 


28 


9.80 


37 


12.95 


47 


16.45 


20 


7.00 


29 


10.15 


38 


13.30 


48 


16 80 


21 


7.35 


30 


10.50 


39 


13.65 


49 


17.15 


22 


7.70 


31 


10.85 


40 


14.00 


50 


17.50 


23 


8.05 


32 


11.20 


41 


14.35 


51 


17.85 


24 


8.40 


33 


11.55 


42 


14.70 


52 


18.20 


25 J 


8.75 


34 


11.90 


43 


15.05 


53 


18.55 


26 


9.10 


25 


12.25 


41 


15.40 


54 


18.90 










45 


15.75 


55 


19.25 



OF LIFE INSURANCE. 197 

As an additional safeguard against the frauds and impositions 
practiced upon insurance organizations it is provided that the mem- 
bership shall be selected with great care, and that no applicant be 
admitted without the approval of the local banker, both as to the 
character of the applicant and the examining physician, and also that 
the risks be confined to business and professional men, who are not 
only able to pay their obligations, but who can procure the best medi- 
cal treatment in case of sickness, and who can take a season of rest 
and recreation when the health demands it, no risk being written 
South of 36 30'. 

A copy of the certificate of membership is given on next page 

(after policy form). 

Surplus Assets. 

Certificates of membership in this Association terminate if not re- 
newed by a quarterly payment due in January, April, July and 
October of each year — hence the legal insurance liability of the asso- 
ciation, ascertained by the law of reserve and mortality applied to 
level premium companies is the sum of money required to pay claims 
during the current quarter. 

The sum thus required January 1, 1891, was $ 78,746.26 

The surplus assets on that date were 647,497.35 

Total assets $72G,243.61 

A call for funds made in one month can be paid on any business 
day in the month following, and is delinquent if not so paid; al- 
though reinstatement can be made on health certificate or medical 
examination within a reasonable time. Non-payment of guarantee 
note, habitual drinking to excess, or failure to pay calls works for- 
feiture of the guarantee and the insurance also. 

The local bank receives and receipts for all funds of the association 
(no solicitor handling a dollar), which it credits in open account, and 
sends monthly statement for adjustment. Drafts are drawn on the 
depository bank or treasurer to pay commissions, and are forwarded 
with certificates of membership, thus settling with agents promptly. 
Funds are ordered from banks to the treasurer in February, May, 
August and November, for payment of losses, contingent expenses 
and for investment in accordance with the State law. 

Statements showing the condition of the association are issued fre- 
quently and sent to depositories for information of banks and mem- 
bers, and annual reports are made to the insurance department as 
required by law. 

Assets. 

In first mortgage lien on real estate $454,635.00 

In municipal bonds 28,000.00 

In Iowa Insurance Department in trust for policyholders.. $482,635.00 

In Missouri Insurance Department . 1,000.00 

In guarantee notes on members 201,188.20 

In hands of treasurer and assistant. ._ 35,791,37 

Due from banks and bankers 5^629.04 

Total $726,243.61 



198 



THE THREE SYSTEMS 



Liabilities. 

Losses due and unpaid None. 

In process of adjustment _ $ 2,000 

Reported and not proven 12,000 

Resisted on account fraud 2,000 

Rates of Admission on Each $2,000.00 Certificate. 





S* 


a 


1 4J ^ 




v "2 


a 


£jy A 




V o <u 


•* ~ 


W-2 £ 




V O 0) 


x, - 


^ as >» 




<u a o 


WrG 


" a >\ 




<D fi O 


wjG 


< 


Guarant 
Fund in 
at 4 per 
interest. 


Member 
Fee in cas 


Annual 
pense Pay 
July, each 


6 
< 


Guarant 
Fund in 
at 4 per 
interest. 


u en 
rO O 

S c 


Annual 
pense Pay 
July, each 


IS 


$18.00 


$9.00 


$1.80 


37 


$37:00 


$18.50 


$3.70 


19 


19.00 


9.50 


1.90 


38 


38.00 


19.00 


3.80 


20 


20.00 


10.00 


2.00 


39 


39.00 


19.50 


3.90 


21 


21.00 


10.50 


2.10 


40 


40.00 


20.00 


4.00 


22 


22.00 


11.00 


2.20 


41 


41.00 


20.50 


4.10 


23 


23.00 


11.50 


2 30 


42 


42.00 


2100 


4.20 


24 


24.00 


12.00 


2.40 


43 


43.00 


21.50 


4.30 


25 


25.00 


12.50 


2.50 


44 


44.00 


22.00 


4.40 


26 


26.00 


13.00 


2.60 


45 


45.00 


22.50 


4 50 


27 


27.00 


13.50 


2.70 


46 


46.00 


23.00 


4.60 


28 


28.00 


14.00 


2.80 


47 


47.00 


23.50 


4.70 


29 


29.00 


14.50 


2.90 


48 


48.00 


24.00 


4.80 


30 


30 00 


15.00 


3.00 


49 


49.00 


24 50 


4.90 


31 


31.00 


15.50 


3.10 


50 


50.00 


25.00 


5.00 


32 


32 00 


16.00 


3.20 


51 


51.00 


25.50 


5.10 


33 


33 00 


16.50 


3.30 


52 


52.00 


26.00 


5.20 


34 


34.00 


17.00 


3.40 


53 


53.00 


26.50 


5.30 


35 


35.00 


17.50 


3.50 


54 


54.00 


27.00 


5.40 


36 


36.00 


18.00 


3.60 


55 


55.00 


27.50 


5.50 



Medical Examination at Expense of Applicant. 

THE BANKERS LIFE ASSOCIATION. 
Des Moines, Iowa, 189 . 

CERTIFICATE OF MEMBERSHIP, NO. $2,000.00 

This is to certify^ That in pursuance of the articles of incorporation and by- 
laws of this association and in consideration of the statements contained in his 
Application Number , which are hereby made a part of this contract, and the 
sum of dollars, Mr. , of , State of 

_ , by occupation , aged years, has been admitted 

to membership in this association and that in the event of his death during mem- 
bership his beneficiary shall receive the sum of Two Thousand Dollars for this 
certificate of membership and the return of that portion of the guarantee fund 
deposited with the association by the said member amounting to 
dollars. 

Upon the failure of the above named member to make any payment due from 
him to the association at its maturity in January, April, July or October, of each 
year, his guarantee deposit shall be forfeited and his membership shall thereupon 
cease. 

This certificate to become null and void, if death occur from self-destruction 
within two years from this date, the member being sane or insane, or if the mem- 
ber is or shall become habitually intemperate in the use of intoxicating liquors, 
chloral, cocoaine or opium, and no action shall be brought or sustained upon or 
under this certificate unless commenced within one year after the day of the death 
of the member. 

The amount due under this contract to be provided for by an assessment on the 
membership levied pro rata upon the guarantee fund of the association, unless 
otherwise supplied, and to be paid to at the home office of 

the association upon satisfactory proof of claim, to be supplied by the beneficiary. 
In the event of the death of the beneficiary prior to that of the member, or in case 
none is named, the benefit then to be payable to the legal representatives of the 
deceased member. 

In witness whereof the signature of the president, attested 
by the secretary, with the seal of the association, are hereto 
affixed on the date above written. 
Attest : 

Secretary. President. 

Member's Signature. 

Recommended by 

Examined by 



OF LIFE INSURANCE. 190 



CHAPTER XIL 



Synopsis of the Massachusetts Law with Reference to 
Assesment Insurance, by Insurance Commissioner John 
K. Tare ox. — His General Remarks on the Same. — 
His Comparison of Assessment Insurance with Old 
Line Insurance.— Co-operative Business, by John A. 
McCall, Jr., Superintendent of the New York Insur- 
ance Department. — Catch-Penny Institutions. — Reso- 
lutions of the Executive • Committee of the Mutual 
Benefit Life Associations of America.— The Superin- 
tendent's Remarks on the Same, etc., etc., etc.— Co- 
operative Insurance, by Ephriam Williams, Insurance 
Commissioner of Connecticut. — His Remarks on the 
Grouping of different ages for purposes of Assessment. 

From the Thirtieth Annual Report of the Insur- 
ance Commissioner of the Common-wealth of Massa- 
chusetts, January 1, 1885. 

" Chapter 183 of the acts of 1885 is an act to regulate the busi- 
ness of life and health insurance on the assessment plan and to 
authorize the formation of corporations to transact such insur- 
ance on that plan. It is unique in some of its features. Its pro- 
visions apply to all associations, now or hereafter formed, which 
make assessment insurance contracts, except fraternal societies 
and organizations with select membership, and unincorporated 
bodies with a maximum limit of five hundred dollars benefit. 
Corporations organized under it cannot transact business until 
two hundred persons have subscribed for insurance and paid in 
one full mortuary assessment in trust for beneficiaries. Their 
contracts must be for a sum specified in the policy or contract, 
and When the obligation accrues the beneficiary shall have a prior 
lien, defeated only by proceedings in insolvency, upon all the 
property of the corporation for its payment, and, if payment is 
not made within thirty days after demand, the corporation upon 
notification by the commissioner shall issue no policy while 
such notice remains in force. Policies cannot issue upon the life 
of any person over sixty years of age, nor for the benefit of a 
person who has no interest in the insured life. An assignment to 
a person having no interest in the insured life voids the policy. 
Each corporation must provide for an emergency fund, distinct 
from its ordinary death fund, to be maintained at all times, of an 
amount not less than the proceeds of one death assessment on all 
its policy holders. This fund is to constitute a trust for the pay- 
ment of policy claims not otherwise provided for, to be invested 



200 THE THREE SYSTEMS 

in such securities as insurance companies may by law invest their 
capital, and deposited with the treasurer of the commonwealth. 
These securities can be withdrawn from deposit only upon a req- 
uisition of the corporation, endorsed by the insurance commis- 
sioner, and for the purposes of the trust. When the corporation 
shall cease business the fund is to be administered under judicial 
authority (1), for the payment of accrued claims, if any, and (2), 
the payment, in order, of claims that shall accrue. Existing 
corporations are given six months from the passage of the 
act, and newly organized corporations six months from date of 
their incorporation, to accumulate the fund. 

" All assessments must be for a specific purpose, and the pro- 
ceeds must be applied to the stated use. 

" When a corporation not purely mutual neglects without jus- 
tifiable cause for thirty days after proof of death to levy an 
assessment for payment of the claims, the members of the cor- 
poration shall be personally liable to the beneficiary for the 
amount due. 

"No corporation shall re-insure with another corporation unless 
the contract therefor shall be approved by a two-thirds vote of a 
meeting of the policy-holders held to consider the matter. 
Agents, solicitors and physicians of any such corporations, are 
liable to fine and imprisonment for making wilful false state- 
ments or representations in reference to insurance therein. The 
act provides for the admission of similar corporations of other 
States to transact business in Massachusetts. To qualify itself 
for such admission such foreign corporation must file with the 
insurance department (1), a certified copy of its charter ; (2), a 
statement under oath of its business for the preceding year, and 
that it is paying and for the past year has paid in full the maxi- 
mum amount named in its policies ; (3), a certificate from the 
proper authority in its State that like corporations of this com- 
monwealth are legally entitled to do business in such State ; (4), 
a copy of its policy and form of application, which must show 
that benefits are provided for by assessments on policy holders ; 
(5), evidence satisfactory to the commissioner that it accumulates 
a safety or emergency fund equal in amount, and of the charac- 
ter required of our home companies. It is made the duty of the 
commissioner to revoke the authority of such foreign corpora- 
tion whenever he shall be satisfied that it does not pay its policy 
obligations in full. 

■* The act defines the duties and powers of the commissioner 
in respect to these corporations. He is given the same powers of 
visitation and examination as in the case of life insurance com- 
panies under chapter 119 of the Public Statutes. Whenever he 
is satisfied that a corporation has exceeded its powers, failed to 
comply with any provisions of law, or is conducting business 
fraudulently; and, whenever, after notice upon information of its 
default for thirty days to pay a claim due, and investigation had 
thereon, it shall* appear to him the liabilities of a corporation ex- 
ceed its resources, and that it cannot within a reasonable time, 
not more than three months from the date of original default, 
pay its accrued indebtedness in full ; he shall report the facts to 
the attorney-general, who shall apply to the supreme judicial 
court for an injunction and such other judicial proceedings as the 
interests of the corporation and of the public may require. 

"This legislation, though inadequate for some important ob- 
jects, will effect useful results in the care and prevention of sev- 
eral abuses and the protection of the public, at least in a degree, 
from imposition, and is perhaps as radical legislation as could be 



OF LIFE INSURANCE. 201 

secured in the present state of popular feeling and information 
on the subject. 

"I am, however, not content to pass the matter finally with- 
out further brief comment. Insurance has come to be a common 
need of our social life. Corporations engaged in it serve, in a 
special sense, a public want, and are not to be regarded or consti 
tuted or left subject alone to the laws of trade, as are ordinary 
business enterprises organized and conducted primarily for indi- 
vidual profit. The people have the right, which the State should 
guard, to obtain the advantages of these institutions as cheaply 
as they can be furnished, and that the institutions should be con- 
structed on the basis most conservative of the safety of the inter- 
ests they involve. * * * * Corporations 
now organized, with a membership sufficient to pay a full maxi- 
mum benefit from the proceeds of a single assessment, will be 
able to adjust their affairs to the requirements of the new statute 
with little inconvenience, since the old and new certificates will 
possess the same actual value. But corporations with certificates 
issued for a nominal amount, larger than an assessment will real- 
ize, encounter a difficulty in the management of their business 
which may be overcome, and perhaps not otherwise than by a 
substitution for the old certificates of new certificates, conforma- 
ble to law, for a specified sum as nearly equal as may be to one 
assessment collection. This substitution the present members 
should cheerfully consent to, as they will suffer no substantial 
injury thereby, and it seems the only mode to secure equality in 
assessments. I entertain no doubt, sufficient to affect official 
action, that the statute intends the contract shall state precisely 
and unconditionally the sum to which the beneficiary under it is 
entitled, and that any form of contract which left the amount to 
be paid dependent upon uncertain conditions, as the more or less 
proceeds of an assessment, would be judiciously held an unlawful 
evasion of the statute." 

Under the head of Beneficiary and Assessment Insur- 
ance Corporations, the Commissioner says : 

" The department has unofficial information of several asso- 
ciations which organized in form of law and carried on a lawful, 
but essentially fraudulent business with the public, for a season, 
and then disappeared with unfulfilled obligations. These, and 
similar abuses, inflicted upon the public under shield of the law, 
will be measurably redressed in future, by the recent act of the 
legislature. * * * 

" The new statute is likely to compel the speedy departure of 
several, which will be unable to meet its qualifications and have 
no adequate reason for their existence, and others will ultimately 
yield to the competition of more potent rivals. And thus the 
system must abide ultimate judgment upon the fate of a few 
chosen representatives. The demonstration may be somewhat 
remote. A well managed association ought to sustain itself for a 
few years without difficulty. If it attempted to insure lives to the 
age only of fifty, it might rationally go on for an indefinite term 
on that basis. But to an association which undertakes to insure 
persons to the extreme limit of human life, the crisis comes when 
a considerable body of its members reach old age and the death- 
rate rapidly increases, as must be. If assessments are graded to 
the relative prospect of longevity of members, as the ages ad- 
vance, will the old man stay in and pay the greatly augmented 
cost of insurance ? If, as probable, not, then the plan fails as 



202 THE THREE SYSTEMS 

whole-life insurance. Or, if assessments are not graded, will the 
youth stay in and bear his disproportionate burden of a com- 
mon loss for the benefit of the more aged ? The assumption of 
this plan is that new lives will constantly come in and maintain 
the average age and a uniform death-rate, in which case the asso- 
ciation may last and perform its functions while those relations 
are kept. Time will test and judge its merits and limitations. 
Meanwhile, we may safely assume that with proper administra- 
tion the assessment plan may furnish a cheap and good temporary 
insurance and a public beneficence'; and that the absolute life 
insurance afforded by the level premium method, is not possible 
to the assessment plan as yet formulated, because the latter de- 
pends on conditions of the future, incapable of present assur- 
ance. It is the difference between a naked conditional promise, 
and an absolute promise secured by sufficient pledge of value. 
Both plans of insurance have distinctive merits, and in behalf of 
both, pretensions are put forth not entitled to respect. ,, 

The Hon. John A. McCall, Jr., Superintendent of the 

Insurance Department of the State of IN ew York, under the head 
of "Co-Operative Business/' in his official report to the Legis- 
lature of that State, for the year ending Dec. 31, 1884— date of 
report, Feb. 19, 1885— says : 

" The management of the Co-operative organizations gener- 
ally appears to be intrusted to reliable and faithful officials, but 
the difficulty encountered in securing members without the inter- 
vention of special agents is apt to place the control and continu- 
ance of the association within the power of the intervenors. In 
very many instances it has been found that the allegiance and 
loyalty of these individuals depend upon the extension of, or ad- 
ditions to, their jug-handle contracts. And once they sever their 
connection with an association, their zeal and activity in pointiug 
out its weak spots is comparable only to their efforts to destroy 
its existence, by a transfer of the members to the agent's latest 
attachment. It is not surprising that the vehement individuals 
that prate unceasingly against old line companies should be 
found pursuing the most objectionable of their methods. In the 
prominent cases of this coming within the censure of the De- 
partment, and made manifest by its investigations, the names of 
former agents of defunct life insurance companies appear con- 
spicuously. If mentioned they would be recognized as the in- 
ventors of chimerical plans, and the stentorian advocates of cor- 
porations whose weakness was their chief feature. It is not 
difficult, then, to understand that mistrustfulness and doubt are 
engendered by the action and promises of such employes, or that 
such associations will have but a short-lived existence, when it is 
realized that the rights of their members are subordinate to the 
privileges and powers of the agents. The fair-minded people 
who are honest in their advocacy of this plan of preservation, 
and whose efforts are directed to protect themselves by reform 
within, and from danger without, the co operative institutions, 
are fully cognizant of the troubles that threaten to destroy the 
usefulness of all the associations. To them the superintendent is 
confident he will not appeal in vain for assistance in the correc- 
tion of the abuses described. The officers who prosecute their 
business in an honest way need have no fear that any doubt of 
the superintendent as to the system of assessment insurance will 
be allowed to destroy or impair the existence of any legitimate 
organization. The law will be carried out in every case, without 



OP LIFE INSURANCE 203 

consideration or thought of the great influences which are often 
referred to as being continually at work, in and Out of the Legis- 
lature, for and against co-operative associations. There will be 
no hesitation in criticising or closing up the affairs of any mis- 
managed institution, through contemplation of the effect it may 
have on the remaining associations; neither will the superintend 
ent condemn a society because it shows evidence of success, 
thus disproving the assertions and predictions of those who are 
paid to print their conclusions. 

"The pretenses and promises of some of the managers would 
be grotesque if they were not put forth in a serious way. It is 
not doubted that if the promoters of some of the advertised 
schemes were pecuniarily responsible, they could be compelled, 
personally, by reason of their false representations to make good 
their wondrous pledges. That the danger to honest assessment 
organizations caused by the practices of the catch-penny institu- 
tions is realized, will be seen by reference to the report of the 
executive committee of the Mutual Benefit Life Associations of 
America, made at the ninth annual convention, held in October 
last, at Cincinnati, as follows: 

" 'First. The expense of management must be provided for, 
in the main, by fixed annual dues. . 

' ' 'Second. The mortality rates at age of entry must be graded 
according to one of the combined standard mortality tables. 

" 'Third. If the mortality rates do not increase with age, 
after entry, the rates at entry must be loaded twenty -five per cent. , 
at five per cent, per annum" compound interest, and such loading 
with interest must be held as a liability or reserve, and applied to 
the payment of the respective policies when they become claims, 
and the assessments upon surviving members correspondingly 
reduced. 

"'Fourth. If the rates increase after age of entry, such in- 
crease must not be less than 100 per cent., or double the original 
rate, by the end of the probability of life expectancy of the 
insured. 

" 'Fifth. If any sum* of money or endowment is promised to 
members during life, such sum must be provided for by collecting 
monthly, quarterly, semi-annual, or annual payments, in excess 
of the cost of mortality, that will, at four and a-half per cent, 
per annum during the endowment period, amount to the sum 
promised. 

" 'Sixth. If a uniform rate for all ages is charged, the benefit' 
to be paid must be graded according to the life expectation, 
and when graded according to life expectation from age of 
entry, the rate of assessment must be loaded at least twenty five 
percent., at the rate of five per cent, per annum, and reserved 
and used in part payment of death claims in order to offset the 
increasing liability arising from the advancing age of members. 

'"Seventh. All the modern precautions in selection must be 
rigidly enforced, and no members admitted over the age of sixty/ 
"The recommendations of the committee are quite commend- 
able, and they are quoted here as the judgment of intelligent offi- 
cials, who by experience are entitled and competent to point out 
the apparent dangers to the system, and suggest the needed 
remedies, 

"The superintendent does not desire to be understood as 
favoring or endorsing all of the above recommendations, and in 
particular he objects to to the one referring to endowment pay- 



204 THE THREE SYSTEMS 

ments, to which payments, on any assessment plan, he is op- 
posed, as being futile and in contradiction of the theory of co- 
operative insurance. In the main, however, the report of the 
committee is exceedingly conservative, and will tend to protect 
the associations and their members from the evils connected with 
the sham concerns that ' have no hope of existence unless they, 
so to speak, undersell the honest ones, by promising larger bene- 
fits for the same money or similar benefits for less money/" 

" In the line of reform, also, is the action taken during this 
year, by the Illinois Mason's Benevolent Society, an institution 
that has paid in fourteen years about $2,500,000 to the benefici- 
aries of its members. It was apparent from the experience of 
the society, that while abundantly able to care for its present 
claims, it was evident it had outlived the scheme upon which it 
was founded, and its survival depended entirely upon a change 
of its plan, so that assessments would be regulated by the in- 
creasing age of the member, instead of a uniform contribution 
without regard to age. This recognition of the only method 
that can give permanency to the co-operative plan of life insur- 
ance, is deserving of emulation by the organizations that are 
operating on the fallacious principle that served to lull the 
Western organization into a fancied security, until ' the society 
languishes, and while the older men remain with it, without di- 
minished risks, the young fail to be attracted in numbers sufficient 
to reduce the average age . ' " 

The Hon. Ephraim Williams, Insurance Commissioner for 
the State of Connecticut, in his official report to the Legislature 
for the year ending Dec. 31, 1884 — report dated April 10, 1885 — 
says: 

"All properly conducted assessment companies Hx their 
yearly assessments strictly according to the respective ages of 
the members and the year's risk at those ages. All grouping of 
different ages for a like assessment is inequitable, and therefore 
objectionable. For the younger ages in the group pay not only 
for themselves, but also in part for the older ages. It matters 
not whether the assessment be large enough to cover the risk of 
the eldest age inihe group or only sufficient to cover the aver- 
age age; in either case the younger are overcharged." 

The foregoing official utterances of the Insurance Commis- 
sioner of Massachusetts, and of the Superintendents of Insur- 
ance for the States of New York and Connecticut, are worthy of 
careful consideration. More attention has been given to life 
insurance in all its different phases, and more money expended 
in its supervision, in these three States than in all the other 
States of the Union. 



OF LIFE INSURANCE. 205 



CHAPTER XIII. 



interest.— Interest Laws of The States. — Explanation of 
the Tables. — Tables. 

INTEREST. 

Interest, in the sense of recompense for money lent, origina- 
ted very early in the world's history. There are frequent allu- 
sions to it in the Scripture, under the title of " usury, " which 
was the old English word for interest. 

Robertson tells us that the fixed rate of interest in the 12th 
century was twenty per cent. In 1560 it was fixed in Spain, Ger- 
many, and Flanders, by the emperor, Charles V., at twelve per 
cent. Not until the 15th century were Christians allowed to re- 
ceive interest on money. Jews were the only usurers. The low- 
est rate of interest in Athens was ten per cent, per annum, and 
the highest thirty-six per cent. In Rome similarly exorbitant 
rates were exacted. About the year B. C. 346, the rate was limi- 
ted to five per cent. ; and five years later, the practice of taking 
interest for money was forbidden, altogether, and he who re- 
ceived more than he advanced was rendered liable to four-fold 

« 

restitution. The earliest enactment upon the subject mentioned 
in English history, was A. D. 1197, forbidding Christians to take 
interest for money. In 1546, in the 37th year of the reign of 
Henry VIII., an Act was passed limiting the legal rate of inter- 
est, in England, to ten per cent, per annum, but it was repealed. 
May 1st., 1552. This last Act was entitled "A Bill against 
Usuries and re-enacted the prohibitions contained in previous 
Acts, with similar penalties. The Act of 1552, was in force un- 
til 1571, when the legal rate was fixed at ten per cent. This con- 
tinued until 1624, when the rate was reduced to eight per cent., 
and the word " interest'' was first used instead of usury; it was 
afterwards reduced to six percent., and, in 1714 to five per cent., 
remaining so, with one or two exceptions, for a few years, when 
it was suspended and still remains so. 

Most other countries have, at some period of their history, 
found it necessary to limit the rate of interest. In 1228 the rate 
was fixed, at Verona, at twelve and one-half per cent., per annum. 
In 1242, James I. , King of Aragon, fixed it at eighteen per cent. 



206 



THE THREE SYSTEMS 



In 1270 the lega] rate at Modena was twenty per cent. There is 
an edict of Phillip Augustus, near this period (1272), limiting the 
Jews, in France, to forty-eight per cent ! In 1811 Phillip IV. 
fixed the interest that might be legally exacted in the fairs of 
Champagne at twenty per cent. In 1336 the Republic of Florence 
borrowed money of individuals upon an assignmeDt of taxes at 
fifteen per cent. In 1490, at Piacenza, the rate was as high as 
forty per cent. In 1491, the first public sanction, by the Popes, 
to the payment of interest, was given ! The price of the Public 
Funds is perhaps the best criterion in any country, and has been 
taken as such by the most experienced writers on the subject. 
The Public Funds indicate the abundance or scarcity of money; 
are affected by war and peace, and by national prosperity or ad- 
versity. They may therefore be termed the national thermome- 
ter. As the price of the Public Funds goes down, the rate of in- 
terest rushes up. War and scarcity operate in this direction, 
and afford us another remarkable instance of the operation of the 
law of compensation. War and famine accelerate the rate of 
mortality, but they also improve the rate of interest, so it is 
probable that Assurance Offices with large accumulation of funds, 
realize, under such conditions, as much by excess of interest on 
their investments as they lose by the excess of mortality. 

The relative effects of simple and compound interest may be 
seen in the following : 

TABLE No. 2. 



Rate per cent, per At s 


imple interest it will 


At compound interest it will 


annum. 


double. 






doubh 




2 ] 


[n 50 years 


In 35 


years 


2K 


' 40 


' 


<< 


28 


a 


3 


' 33^ ' 


c 


a 


2BH, 


a 


3% 


' 28% ' 


t 


a 


20% 


" 


4 


' 25 


i 


a 


W, 


a 


4^ 


' 22M < 


i 


a 


15% 


a 


5 


' 20 


i 


a 


w« 


cc 


6 


' 16^ ' 


i 


'i 


12 


a 


7 


' 14« ' 


i 


( . 


10* 


tf. 


8 


' 12% 




tt 


9 


t : 


9 


< 9 


( 


it 


8 


a 


10 


" 10 


<i 


't 


?X 


" 



Mr. Francis Bailey calculated, up to the year, 1810, that, if 
one penny had been put out at five per cent., compound interest, 
at the birth of Christ, it would have amounted to more money 
than could be expressed by 357 millions of Globes, each equal to 
the earth in magnitude, all of solid gold of standard quality, 
worth, at the mint price, three pounds, seventeen shillings and a 
half penny, per ounce ; whereas, if the penny had been put out 



OP LIFE INSURANCE. 207 

at the same rate, at simple interest, the amount in the same time 
would have been only seven shillings and seven pence half 
penny! ! Mr. Hillman extended the calculation up to the end 
of the year, 1846, giving as the result, two thousand one hundred 
and seven millions, five hundred and thirty thousand, eight hun- 
dred and sixty-four worlds of solid gold ! Supposing the diame- 
ter of the world to be 8,000 miles, these globes, placed in a 
straight line, would reach into space sixteen billions, eight hun- 
dred and sixty thousand two hundred and forty- six millions, nine 
hundred and twelve thousand miles, quantities too large for 
human comprehension. (O. Walford — 1867.) 

The practical advantage in saving and compounding, 
even small sums of money, for a term of years, is shown by the 
following : 

Everyman, at age 50, who has saved $1.25, per day since 
he was 21 years old, and compounded it, annually, at 4 per 
cent., is worth $25,000 ! 88 cents per day at 6 per cent. 

Every man, at age 55, who has saved $1.51 per day, since 
he was 21 years old, and compounded it, annually, at 4 per 
cent., is worth $40,000 ! Only $1.00 per day, at 6 per cent : 

Every man, at age 60, who has saved $1.75, per day, since 
he was 21 years old, and compounded it, annually, at 4 per cent., 
is worth $60,000 ! ! 



208 



THE THREE SYSTEMS 



TABLE No. 3. 

INTEREST LAWS OF THE STATES. 

(From the Bankers' Almanac and Register.) 





Rate per 




State. 


cent. 


Penalty of Usury. 






[By special 






Legal. 


contract. 




Alabama 


8 




Loss of interest. 


Arizona 


10 


6 


None. 


Arkansas .... 


6 


10 


Forfeiture of principal and interest. 


California... . 


10 


No limit 


None. 


Colorado 


10 


No limit 


None. (8 per cent, allowed on town 
and county bonds. ) 


Connecticut. . 


6 


6 


None. 


Dakota 


7 


12 


( Forfeiture of contract. (No limit 
\ in five counties named. (Act of 
( Feb. 21, 1881. 


Delaware 


6 


6 


Forfeiture of contract. 


Dist. of Col- 








umbia 


6 


10 


Forfeiture of all interest. 


Florida 


8 


No limit 


None. 


Georgia 


7 


8 


Forfeiture of all interest. 


Idaho 


*10 


18 


1 Forfeiture three times the excess 
■I of interest over 18 per cent. 
( Act Feb. 21, 1879. 


Illinois 


6 


8 


Forfeiture of all the interest. 


Indiana 


6 


8 


Forfeiture of interest over 6 per cent 


Iowa 


6 


10 


Forfeiture of interest and costs. 


Kansas 


7 


12 


Forfeiture of excess of interest 
over 12 per cent. 


Kentucky 


6 


10 


Forfeiture of excess of interest. 


Louisiana. . . . 


5 


8 


Forfeiture of interest. 


Maine 


6 


No limit 


None. 


Maryland. . . . 


6 


6 


Forfeiture of excess interest. 


Massachusetts 


6 


No limit 


None. (Six per cent, and judg- 
ments.) 


Michigan 


7 


10 


Forfeiture of excess interest 


Minnesota. . . 


7 


10 


Forfeiture of contract, if more than 
10 per cent, is charged. 


Mississippi. . . 


6 


10 


Forfeiture of interest overlOper cent 


Missouri 


6 


10 


Forfeiture of all interest. 


Montana 


10 


No limit 


None. 


Nebraska. . . . 


7 


10 


Forfeiture of all interest and costs. 


Nevada 


10 


No limit 


None. 


New Hamp- 








shire 


6 


6 


Forfeiture 3 times excess of interest 


New Jersey. . 


6 


6 


Forfeiture of all interest and costs. 


New Mexico. 


6 


12 


None. 


New York . . . 


6 


6 


Forfeiture of contract ; $1,000 fine ; 
6 months' imprisonment. 


North Caro- 






Forfeiture of double amount of in- 


lina 


6 


8 


terest. 


Ohio 


6 


8 


Forfeiture of excess interest. 


Oregon 


10 


12 


Forfeiture of interest, principal and 

costs. 



*Usurers liable to arrest for misdemeanor. 



OF LIFE INSURANCE. 

Interest Laws. — Continued. 



209 



State. 


Rate per 
cent. 


Penalty of Usury. 




Legal. 


By specia 
contract. 




Pennsylvania 

Rhode Island 

South Caro- 
lina 

Tennessee . . 

Texas 

Utah 

Vermont 

Virginia 

Washington 

Territory 
West Virginia 

Wisconsin 

Wyoming.. . . 


6 
f6 

6 

7 

8 

10 

6 

6 

10 
6 

7 
12 


6 

No limit 

10 
6 

12 
No limit 

i 

No limit 
6 

10 
No limit 


Forfeiture of excess interest. — Act 

of May 28, 1858. 
Forfeiture, unless a greater rate is 

contracted. 

Forfeiture of all interest. 
Forfeiture excess interest over 6 per 

cent. 
Forfeiture of all interest. 
None. 

Forfeiture of excess interest. 
Forfeiture of excess interest. 

None. 

Excess credited on sum due. 

Forfeiture of all the interest. 

None. 



tRate on judgments unless otherwise expressed. ZOn Rail Road bonds only, 
a. On open accounts not more than six per cent., six months after delivery of last 
article, b. Any rate may be taken on loans exceeding $5,000, secured by warehouse 
receipts, bills of lading, etc. 



EXPLANATION OF THE TABLES. 

Table No. 1.— Col. (1) is made up as follows: The legal 
reserve, for instance, Actuaries' 4% on $1,000 of insurance, Or- 
dinary Life Plan, issued at age 10, is $4,115 at the end of the 
first policy year. The present value of $4,115, for one year, 4 
percent, interest, is $3.96, and, therefore, this $3.96 at interest 
for one year — until end of first policy year — exactly equals the 
legal reserve at end of year. The $3.96 is the "Reserve Ele- 
ment" or germ, that produces the legal reserve, end of year. It 
is not the legal reserve at the beginning of the year — that is the 
net premium, or $10.43 — but it is the " Reserve Elemevt," as we 
call it. In a similar manner all the reserve elements at the differ- 
ent ages, from 10 to 99, inclusive, going to make up Col. (1), are 
produced. 

Col. (2) is made up as follows: Confining ourselves to amount 
and kind of insurance, as above, and the age of entry, the net 
annual premium, as stated above, is $10.43. This is composed of 
the reserve element and the mortality element. The reserve ele- 
ment is $3.96, and, taking it from the net annual premium, 
$10.43, leaves $6.47, which is the mortality element. The other 



210 THE THREE SYSTEMS 

mortality elements are found in a similar manner, and all of. them 
from age 10 to age 99, constitute Col. (2). 

Col. (3) is found by adding Col. (1) to Col. (2), which, at age 
10, gives $10.43, and taking one-third of it, $3.48, we have the 
expense element. Similarly with reference to all the other ages. 

Col. (4) is columns (1), (2), and (3) added together. At age 10, 
it is $3.96+ $6.47+$3.48, equals $13.91; and similarly with refer- 
ence to all the ages from 10 to 99, inclusive. These three columns 
constitute the elements of the gross level premiums, the first year, 
for $1,000 of ordinary life insurance, at the ages named, when 
they are based on the Actuaries' Table of Mortality and 4 per 
cent, interest. The elements of other kinds of premiums — 
Limited-payment Life, Endowment, etc., etc.— may be ascer- 
tained in a similar manner by using the reserve end first policy 
year, net premium, etc., etc., applicable to these several kinds of 
insurance. 

Table No. 1%.— Col. (1) is identical with Col. (6), Table 
No. 16, and is ascertained by mathematical calculations. Col (2) 
is one-third of Col. (1). Col. (3) is columns (1) and (2) added to- 
gether. It is the net natural premium loaded thirty-three and 
one-third per cent. 

Table No. 2. — No explanation required. 

Table No. 3. — No explanation required. 

Table No. 4. — Required the amount of $1.00 per annum, at 
3 per cent., simple interest, for five years. One dollar is on in- 
terest for five years; one for four; one for three; one for two, 
and one for one year. The interest on the first dollar invested is 
three cents per year for five years, amounting to 15 cents. The 
interest on th« second dollar invested is 3 cents per year for 4 
years, amounting to 12 cents. The interest on the third dollar 
amounts to 9 cents; on the fourth dollar, 6 cents; and on the fifth 
dollar, 3 cents. These different sums— 15 cents, 12 cents, 9 cents, 
6 cents and 3 cents— added together amount to 45 cents, which 
added to the principle— $5.00— rfves $5.45. The same result 
would be ascertained in Col. (1) at the right hand of (5) in the 
year column, at a glance; and similarly with reference to any 
other rate of interest, for any time, named in the table. To as- 
certain the amount of $100, $500, or any other sum, first find the 
amount of $1.00 by the table, and then multiply this by the num- 
ber of dollars. 

Table No. 5. — What will $1.00 amount to, compounded, an- 
nually, at 6 per cent, interest, in 30 years? By looking at Col. (6), 
in the table opposite (30) in the year column, we find $5.74, the 
answer. For 40 years, it amounts to $10.29, and so on. For 
other rates, times and amounts, first ascertain the amount of 



OF LIFE INSURANCE. 211 

$1.00 by the table, and then multiply this result by the number 
of dollars. 

Table No. 6— What will $1.00 per annum amount to, com- 
pounded, annually, at 6 per cent, interest, in 30 years? In Col. (6) 
of the Table opposite (30) in the year column, we find $83.80 
the answer; $40 per annum thus compounded would amount to 
40 times $83.80, or $3,352, and similarly with reference to other 
amounts, at other rates of interest for a longer or shorter time. 

Table No. 7. — Sow much will $1.00 per annum, for 10 
years, compounded, annually, . at 5 per cent, interest, amount to in 
40 years? In Col. (5), opposite (40) in the year column, we find 
$57.08 the answer. $80 per annum thus invested would amount 
to eighty times $57.08, or, $4,566.40, and similarly with reference 
to other amounts and rates for a longer or shorter time. The an- 
nual investment in this table, whatever it may be, terminates at 
the end of the first ten years; but the compounding continues 
until the end of the time designated. 

Table No. 8, — How much will $1.00 per annum for 15 
years, compounded annually, at 4 per cent, interest, amount to in 

50 years? In Col. (4) opposite (30) in the year column, we find 
$37.50 the answer. $100 per annum thus invested would amount 
to 100 times $37.50, or $3,750, and similarly with reference to 
other amounts and rates, for a longer or shorter time. 

Table No. 9.— What icill $1.00 per annum for 20 years, 
compounded, annually, at 6 per cent, per annum, amount to in 
40 years? In Col. (6) opposite (40) in the year column, we find 
$125.05 the answer. $90 per annum thus invested would amount 
to 90 times $125.05, or $11,^254. 50, and similarly with reference to 
other amounts and rates of interest, for a longer or shorter time. 

Table No. 10. — If $1.00 be due and payable 4-0 years hence, 
and money will earn 4 V eT eent. per annum, compound interest, 
during that time, what is the present value of the dollar? In Col. 
(3), opposite (40) in the year column, we find $.2083— nearly 21 
cents — the answer; that is to say 21 cents invested 40 years, and 
made to earn 4 per cent, compound interest, annually, will just 
exactly amount to the $1 in 40 years. Twenty-one cents paid 
down to-day, or $1 paid in 40 years from now, are equivalent 
sums, if money be worth 4 per cent, per annum compound inter- 
est. The present value of $50 would be 50 times $.2083, or 
$10,415. 

Table No. 11.— What is a contract, requiring the payment of 

51 at the end of evevy year for the next 40 years, worth, now, as- 
suming money to be icorth 5 per cent, compound interest? In Col. 
(5) opposite (40) in the year column, we find $17.1591 the answer. 
In other words $17.1591, paid down in one sum is equivalent to 



212 THE THREE SYSTEMS 

the payment of $1 at the end of every year for 40 years. Corn- 
pare Table No. 11 with Table No. 6. 

Table No, 12. — How much money must be invested every year, 
and compounded, annually, at 6 per ce?it., to amount to $50,000 in 
25 years? In Col. (6) opposite (25) in the year column, we find 
$17.20. This is the uniform annual investment requisite to pro- 
duce $1,000, at the rate and for the time assumed. To produce 
$50,000, the annual investment must therefore be 50 times $17.20, 
or $860, the answer. 

Table No. 13. — How much money must be invested, every 
year, for 10 years, only, and compounded, annually, at 6 per cent, 
interest, to amount to $1,000 in 20 years, from beginning of the in- 
vesting period? In Col. (6) opposite (20) in the year column, we 
find $39.97 the answer. To produce $50,000, multiply the $39.97 
by 50, making $1,998 50; and similarly with reference to any 
other amounts, and rates of interest. 

Table No. 14. — How much money must be invested, every 
year, for 15 years, only, and compounded, annually, at 4 per cent, 
interest, to amount to $1,000 in 30 years, from the beginning of 
investing period? In Col. (4) opposite (30) in the year column we 
find $26.66, the answer. To produce $10,000 the annual invest- 
ment must be ten times $26.66, and similarly with reference to 
other amounts. 

Table No. 15. — How much money must be invested, every 
year, for 20 years, only, and compounded, annually, at 8 per cent, 
interest, to amount to $1,000 in 33 years? In Col. (8) opposite (33) 
in the year column, we find $7.44, the answer, and similarly with 
reference to other amounts, etc. 

Table No. 16.— This is the celebrated Actuaries' Table of 
Mortality, the history of which has been given in another part of 
this book, with several other columns added. Columns (1) and 
(2) constitute the table, proper. Col. (3) is obtained by dividing 
the number in Col. (2) opposite each age by the number in Col. (1) 
opposite the same age. Col. (1) represents 100,000 persons living 
at age 10, at the beginning of the year, and Col. (2) shows that 
676 of them died during the year. 99,324 lived to be 11 years old, 
but 674 of them died before they became 12 years old, and so on, 
until they all died, only one single person of the 100,000 at age 
10 reaching the age of 99, and he dies before attaining the age 
of 100! 

Column (3) is very instructive. It shows that at age 20, over 
seven persons die during a year out of 1,000 living at the begin- 
ning of the same year; at age 25, nearly eight die; at 30, nearly 
eight and one half; at 35, more than nine and one-quarter; at 40, 
more than ten and one-third; at 45, nearly twelve and one-quarter; 



OF LIFE INSURANCE 213 

at 50, nearly sixteen; at 55, nearly ticenty-tico; at 60, over thirty; 
at 65, over forty- four; at 70, nearly sixty-five; at 75, over ninety- 
five; at 80, over one hundred and forty; at 85, over two hundred 
and five; at 90, nearly three hundred and twenty-four ; at 95, over 
five hundred and eighty -four ; and, at age 99, one thousand 
persons die during- the year out of one thousand living 
at the beginning- of the year. Taking the same number of 
persons at each of the ages, and noting the comparative number 
of deaths; we find that more than twice as many die at 50 as at 
25; more than twice as many at 61 as at 50; nearly twice as many 
at 70 as at 61 ; more than twice as many at 80 as at 70, and so on. 
The per cent, of deaths increases very rapidly after 55, when 
many of our assessment companies cease grading their rates, if, 
indeed, they grade them at all after entry! 

Column (4) gives the expectation of life at the different ages. 
For example, at age 10, the average of after life is 48 years and 
36-100 of a year; at age 32, it is about thirty-three years, and 
so on. 

Column (5) gives the net level annual premiums for insuring 
$1,000 for life, at the different ages. These premiums loaded from 
twenty-five to forty per cent., varying with different companies, 
constitute the table rates found in the rate books of Level Pre- 
mium Companies, for $1,000 of ordinary life insurance. 

Column (6) gives the natural premiums at the different ages. 
This column is the basis of rates for the Natural Premium Com- 
panies, and the better class of Assessment Associations, of which 
much has been said in previous pages. 

Table No. 17. — Remarks similar to those made with refer- 
ence to Table No. 16 can be appropriately made with reference 
to this table. Both tables are very extensively used. 

Table No. 18.— Fully explained. 

Table No. 19. — Fully explained and frequently referred to 
in other pages. 

Other Tables, A, B, C, D, etc., etc., are used in explanation of 
facts and principles stated, and are readily understood in the 
application thus made of them. 



214 



TABLE 

Showing the elements of which a Level An- 
composed, based on the Actuaries' Table 



Age. 


Reserve 


Mortality 


Expense 


Gross Level 


element. 


element. 


element. 


premium. 




Col. i. 


Col. 2. 


Col. 3. 


Col. 4. 


10 


$3.96 


$6.47 


$3.48 


$13.91 


11 


4 13 


6.50 


3.54 


14.17 


12 


4.32 


6.52 


3.61 


14.45 


13 


4.51 


6.56 


3.69 


14.76 


14 


4.70 


6.60 


3.77 


15.07 


15 


4.90 


6.64 


3.85 


15.39 


16 


5.10 


6.70 


3.93 


15.73 


17 


5.31 


6.76 


4.02 


16.09 


18 


5.54 


6.81 


4.12 


16.47 


19 


5.76 


6.88 


4.22 


16.86 


20 


5.98 


6.97 


4.32 


17.27 


21 


6.20 


7.07 


4.43 


17.70 


22 


6.48 


7.13 


4.54 


18 15 


23 


6.74 


7.22 


4.66 


18.62 


24 


7.02 


7.31 


4.78 


19.11 


25 


7.31 


7.41 


4.91 


19.63 


26 


7.61 


7.52 


5.04 


20.17 


27 


7.92 


7.64 


5.18 


20.74 


28 


8.25 


7.76 


5.33 


21.34 


• 29 


8.59 


7.89 


5.49 


21.97 


30 


8.95 


8.02 


5.66 


22.63 


31 


9.34 


8.15 


5.83 


23.32 


32 


9.72 


8.32 


6.01 


24 05 


33 


10.13 


8.49 


6.20 


24.82 


34 


10.50 


8.73 


6.40 


25.63 


35 


11.04 


8.83 


6.62 


26.49 


36 


11.53 


9.01 


6.85 


27.39 


37 


12.07 


9.19 


7.09 


28.35 


38 


12.62 


9.40 


7.34 


29.36 


39 


13.22 


9.60 


7.61 


30.43 


40 


13.86 


9.82 


7.89 


31.57 


41 


14.54 


10.05 


8.19 


32.78 


42 


15.25 


10.30 


8.52 


34.07 


43 


15.95 


10.64 


8.86 


35.45 


44 


16.63 


11.05 


923 


36.91. 


45 


17.31 


11.54 


9.61 


38 46 


46 


17.97 


12.11 


10.03 


40.11 


47 


18.64 


12.75 


10.46 


41.85 


48 


19.33 


13.44 


10.92 


43.69 


49 


20.06 


14.17 


11.41 


45.64 


50 


20.78 


15.00 


11.92 


47.70 


51 


21.53 


15.89 


12.47 


49.89 


52 


22.29 


16.86 


13.06 


52.21 


53 


23.08 


17 92 


13.66 


54.66 


54 


23.90 

• 


19.05 


14.32 


57.27 



215 



No. I. 

nual Life Premium for $| 9 ooo of Insurance is 
of Mortality, and 4 per cent, interest. 





Reserve 


Mortality 


Expense 


Gross Level 


Age. 


element. 


element. 


element. 


Premium. 




Col. i. 


Col. 2. 


Col. 3. 


col. 4. 


55 


$24.73 


$20.30 


$15 01 


$ 60.04 


56 


25.59 


21.64 


15.75 


62.98 


57 


26.50 


23.07 


16.53 


66.10 


58 


27.42 


24.65 


17.35 


69.42 


59 


28.37 


26.35 


18.25 


72.97 


60 


29.27 


28.29 


19.19 


76.75 


61 


30.20 


30.37 


20.19 


80.76 


62 


31.11 


32.67 


21.26 


85.04 . 


63 


32.03 


35.17 


22.40 


89.60 


64 


32.93 


37.91 


23.61 


94.45 


65 


33.84 


40.88 


24.90 


99.62 


66 


34.70 


44.15 


26.28 


105.13 


67 


35.58 


47.66 


27.74 


110.98 


68 


36.45 


51.46 


29.31 


117.22 


69 


37.36 


55.53 


30.97 


123.86 


70 


38.25 


59.95 


32.74 


130.94 


71 


39.15 


64.72 


34.62 


138.49 


72 


40.06 


69.85 


36.64 


146.55 


73 


40.97 


75.39 


38.79 


155.15 


74 


41.89 


81.36 


41.08 


164.33 


75 


42.82 


87.79 


43.54 


174.15 


76 


43.80 


94.69 


46.16 


184.65 


77 


44.75 


102.19 


48.95 


195.89 


78 


45.67 


110.31 


51.99 


207.97 


79 


44.69 


118.99 


55.23 


220.91 


80 


47.80 


128.60 


58.70 


. 234.80 


81 


49.16 


138.16 


62.44 


249.76 


82 


50.87 


148.62 


66.49 


265.98 


83 


52.95 


. 159.83 


70.93 


283.71 


84 


55.58 


171.84 


75.81 


303.23 


85 


58.53 


185.20 


81.24 


324.97 


86 


61.87 


200.16 


87.34 


349.37 


87 


65.68 


217.01 


94.23 


376.62 


88 


69.62 


236.61 


102.08 


408.31 


89 


73.50 


259.65 


111.05 


444.20 


90 


77.70 


286.20 


121.30 


485.20 


91 


81.76 


317.51 


133.09 


532.36 


92 


84.54 


355.41 


146.65 


586.59 


93 


85.54 


400.53 . 


162.02 


648.09 


94 


84.43 


452.86 


179.09 


716.38 


95 


74.38 


519.05 


197.57 


790.28 


96 


62.38 


583.24 


215.21 


860.83 


97 


89.04 


604.04 


231.03 


924.11 


98 


186.34 


581.40 


255.91 


1,023.65 


99 


961.54 




320.51 


1,282.05 



216 



TABLE 

Showing the elements of which a Natural 
based on the Actuaries' Table of 



Age. 


Mortality 


Expense 


Gross Natural 




element. 


element. 


Premiums, 




Col. i. 


Col. 2. 


Col. 3. 


10 


$6.50 


$2.17 


$ 8.67 


11 


6.53 


2.18 


8.71 


12 


6.55 


2.19 


8.74 


13 


6.59 


2.20 


8.79 


14 


6.63 


2.21 


8.84 


15 


6.68 


2.23 


8.91 


16 


6.73 


2.24 


8.97 


17 


6.79 


2.26 


9.05 


18 


6.86 


3.29 


9.15 


19 


6.93 


2.31 


9.24 


20 


7.01 


2.34 


9.35 


21 


7.09 


2.36 


9.45 


22 


7.18 


2.39 


9.57 


23 


7.27 


2.42 


9.69 


24 


7.37 


2.46 


9.83 


25 


7.47 


2.49 


9.96 


26 


7.58 


2.53 


10.11 


27 


7 70 


2.57 


10.27 


28 


7.83 


2.61 


10.44 


29 


7.96 


2.65 


10.61 


30 


8.10 


2.70 


10.80 


31 


8.25 


2.75 


11.00 


32 


8.41 


2.80 


11.21 


33 


8.58 


2.86 


11.44 


34 


8.75 


2.92 


11.67 


35 


8.93 


2.98 


11.91 


36 


9.12 


3.04 


12.16 


37 


9.31 


3.10 


12.41 


38 


9.53 


3.18 


12.71 


39 


9.74 


3.25 


12.99 


40 


9.95 


3. 32 


13.28 


41 


10.20 


3.40 


13.60 


42 


10.48 . 


3.49 


13.97 


43 


10.82 


3.61 


14.43 


44 


11.25 


3.74 


15.00 


45 


11.74 


3.91 


15.65 


46 


12.35 


4.12 


16.47 


47 


13.00 


4.33 


17.33 


48 


13.71 


4.57 


18.28 


40 


14.48 


4.83 


19.31 


50 


15.33 


5.11 


20.44 


51 


16.25 


5.42 


21.67 


52 


17.26 


5.75 


23.01 


53 


18.36 


6.12 


24.48 


54 


19.53 


6.51 


26.04 



217 



No. V 2 . 

Annual Life Premium for $1,000 is composed, 
Mortality, and 4 per cent, interest. 



Age, 


Mortality- 


Expense 


Gross Natural 




element . 


element. 


Premium. 




Col. i. 


Col. 2. 


Col. 3. 


55 


$20.83 


$6.91 


$27.77 


56 


22.24 


7.41 


29.65 


57 


23.73 


7.91 


31.64 


58 


25.37 


8.46 


33.83 


59 


27.16 


9.05 


36 21 


60 


29.17 


9.72 


38.89 


61 


31.36 


10.45 


41.81 


62 


33.77 


11.26 


45.03 


63 


36.38 


12.13 


48.51 


64 


39.26 


13.09 


52.35 


65 


' 42.39 


14.13 


56.52 


66 


45.78 


15.26 


61.04 


67 


49.49 


16.49 


65.98 


68 


53.49 


17.83 


71.32 


69 


57.78 


19.26 


77.04 


70 


62.44 


20.81 


83.25 


71 


67.46 


22.49 


89.95 


72 


72.89 


24.29 


97.18 


73 


78.73 


26.24 


104.97 


74 


85.07 


28.36 


113.43 


75 


91.89 


30.63 


122.52 


76 


99.21 


33.07 


132.28 


77 


107.18 


35.73 


142.91 


78 


115.81 


38.60 


154.41 


79 


125.06 


41.69 


166.75 


80 


135.01 


45.00 


180.01 


81 


. 145.61 


46.40 


192.01 


82 


156. 92 


52.31 


209.23 


83 


169.15 


56.38 


225.53 


84 


182.38 


60.79 


243.17 


85 


197.21 


65.74 


262.95 


86 


213.92 


71.31 


285.23 


87 


232.92 


77.64 


310.56 


88 


255.07 


85.02 


340.09 


89 


281.14 


93.71 


374.85 


90 


311.28 


103.76 


415.04 


91 


347.10 


115.70 


462.80 


92 


389.68 


129.89 


519.57 


93 


439.64 


146.55 


586.19 


94 


496.45 


165.48 


661.93 


95 


561.80 


187.27 


749.07 


96 


623.70 


207.90 


831.60 


97 


665.68 


221.89 


887.57 


98 


721.15 


240 . 38 


961.53 


99 


961.54 


320.51 


1,282.05 



218 



TABLE 

Showing how much $LOO per annum 

from | to 



Years . 


„ 3 


4 


„ 5 


„ 6 




Per cent. 


Per cent. 


Per cent. 


Per cent. 




Col. i. 


Col. 2. 


Col. 3. 


Col. 4. 


1 


$1.03 


$1.04 


$1.05 


$1.06 


2 


2.09 


2.12 


2.15 


2.18 


3 


3.18 


3.24 


3.30 


3.36 


4 


4.30 


4.40 


4.50 


4.60 


5 


5.45 


5.60 


5.75 


5.90 


6 


6.63 


6.84 


7.05 


7.26 


7 


7.84 


8.12 


8.40 


8.68 


8 


9.08 


9.44 


9.80 


10.16 


9 


10.35 


10.80 


11.25 


11.70 


10 


11.65 


12.20 


12.75 


13.30 


11 


12.98 


13.64 


14.30 i 


14.96 


12 


14.34 


15.12 


15.90 


16.68 


13 


15.73 


16.64 


17.55 


18.46 


14 


17.15 


18.20 


19.25 


20.30 


15 


18.60 


19.80 


21.00 


22.20 


16 


20.08 


21.44 


22.80 


24.16 


17 


21.59 


23.12 


24.65 


26.18 


18 


23.13 


24.84 


26.55 


28.26 


19 


24.70 


26.60 


28.50 


30.40 


20 


26.30 


28.40 


30.50 


32.60 


21 


27.93 


30.24 


32.55 


34.86 


22 


29.59 


32.12 


34.65 


37.18 


23 


31.28 


34.04 


36.80 


39.56 


24 


33.00 


36.00 


39.00 


42.00 


25 


34.75 


38.00 


41.25 


44.50 


26 


36.53 


40 04 


43.55 


47.06 


27 


38.34 


42.12 


45.90 


49.68 


28 


40.18 


44.24 


48.30 


52.36 


29 


42.05 


46.40 


50.75 


55.10 


30 


43.95 


48.60 


53.25 


57.90 


31 


45.88 


50.84 


55.80 


60.76 


32 


47.84 


53.12 


58.40 


63.68 


33 


49.83 


55.44 


61.05 


66.66 


34 


51.85 


57.80 


63.75 


69.70 


35 


53.90 


60.20 


66.50 


72.80 


36 


55.98 


62.64 


69.30 


75.96 


37 


58.09 


65.12 


72.15 


79.18 


38 


60.23 


67.64 


75.05 


82.46 


39 


62.40 


70.20 


78.00 


85.80 


40 


64.60 


72.80 


81.00 


89.20 


41 


66.83 


75.44 


84.05 


92.66 


42 


69.09 


78.12 


87.15 


96.18 


43 


71.38 


80.84 


90.30 


99.76 


44 


73.70 


83.60 


93.50 


103.40 


45 


76.05 


86.40 


96.75 


107.10 


46 


78.43 


89.24 


100.05 


110.86 


47 


80.84 


92.12 


103.40 


114.68 


48 


83.28 


95.04 


106.80 


118 56 


49 


85.75 


98.00 


110.25 


122.50 


50 


88.25 


101.00 


113.75 


126.50 



No. 4. 

will amount to, at Simple Interest, in 
50 Years. 



219 



Per cent. 



„ 8 

Per cent. 



Col. s- 
$1.07 

2.21 
3.42 
4.70 
6.05 
7.47 
8.96 
10.52 
12.15 
13.85 
15.62 
17.46 
19.37 
21.35 
23.40 
25.52 
27.71 
29.97 
32.30 
34.70 
37.17 
39.71 
42.32 
45.00 
47.75 
50.57 
53.46 
56.42 
59.45 
62.55 
65.72 
68.96 
72.27 
75.65 
79.10 
82.62 
86.21 
89.87 
93.60 
97.40 
101.27 
105.21 
109.22 
113.30 
117.45 
121.67 
125.96 
130.32 
134.75 
139.25 



Col. 6. 

$1.08 
2.24 
3.48 
4.80 
6.20 
7.68 
9.24 
10.88 
12.60 
14.40 
16.28 
18.24 
20.28 
22.40 
24.60 
26.88 
29.24 
31.68 
34.20 
36.80 
39.48 
42.24 
45.08 
48.00 
51.00 
54.08 
57.24 
60.48 
63.80 
67.20 
70.68 
74.24 
77.88 
81.60 
85.40 
89.28 
93.24 
97.28 
101.40 
105.60 
109.88 
114.24 
118.68 
123.20 
127.80 
132.48 
137.24 
142.08 
147.00 
152.00 



9 

Per cent. 



Col. 7 . 

$1.09 
2.27 
3.54 
4.90 
6.35 
7.89 
9.52 
11.24 
13.05 
14.95 
16.94 
19.02 
21.19 
23.45 
25.80 
28.24 
30.77 
33.39 
36.10 
38.90 
41.79 
44.77 
47.84 
51.00 
54.25 
57.59 
61.02 
64.54 
68.15 
71.85 
75.64 
79.52 
83.49 
87.55 
91.70 
95.94 
100.27 
104.69 
109.20 
113.80 
118.49 
123.27 
128.14 
133.10 
138.15 
143.29 
148.52 
153.84 
159.25 
164.75 



Per cent. 



Col. 8. 
$1.10 

2.30 
3.60 
5.00 
6.50 
8.10 
9.80 
11.60 
13.50 
15.50 
17.60 
19.80 
22.10 
24.50 
27.00 
29.60 
32.30 
35.10 
38.00 
41.00 
44.10 
47.30 
50.60 
54.00 
57.50 
61.10 
64.80 
68.60 
72.50 
76.50 
80.60 
84.80 
89.10 
93.50 
98.00 
102.60 
107.30 
112.10 
117.00 
122.00 
127.10 
132.30 
137.60 
143.00 
148.50 
154.10 
159.80 
165.60 
171.50 
177.50 



Years. 



1 

2 
3 
4 
5 
6 
7 
8 
9 

10 
11 
12 
13 
14 
15 
16 
17 
18 
19 
20 
21 
22 
23 
24 
25 
26 
27 
28 
29 
30 
31 
32 
33 
34 
35 
36 
37 
38 
39 
40 
41 
42 
43 
44 
45 
46 
47 
48 
49 
50 



220 



TABLE 

Showing how much $l.OO will amount 



\r . __ 


3 


3M 


4 


4% 


5 


Years. 


Per cent. 


Per cent. 


Per cent. 


Per cent. 


Per cent. 




Col. i. 


Col. a. 


Col. 3. 


Col. 4. 


Col. 5- 


1 


$1,030 


$1,035 


$1,040 


$1,045 


$1,050 


2 


1.061 


1.071 


1.082 


1.092 


1.103 


3 


1.093 


1.109 


1.125 


1.141 


1.158 


4 


1.126 


1.148 


1.170 


1.193 


1.216 


5 


1.159 


1.188 


1.217 


1.246 


1.276 


6 


1.194 


1.229 


1.265 


1.302 


1.340 


7 


1.230 


1.272 


1.316 


1.361 


1.407 


8 i 


1.267 


1.317 


1.369 


1.422 


1.478 


9 


1.305 


1.363 


1.423 


1.486 


1.551 


10 


1344 


1.411 


1.480 


1.553 


1.629 


11 


1.384 


1.460 


1.540 


1.623 


1.710 


12 


1.426 


1.511 


1.601 


1.696 


1.796 


13 


1.469 


1.564 


1.665 


1.772 


1.886 


14 


1.513 


1.619 


1.732 


1.852 


1.980 


15 


1.558 


1.675 


1.801 


1.935 


2.079 


16 


1.605 


1.734 


1.873 


2.022 


2.183 


17 


1.653 


1.795 


1.948 


2.113 


2.292 


18 


1.702 


1.858 


2.026 


2.209 


2.407 


19 


1.754 


* 1.923 


2.107 


2.308 


2.527 


20 


1.806 


1.990 


2.191 


2.412 


2.653 


21 


1.860 


2.059 


2.279 


2.520 


2.786 


22 


1.916 


2.132 


2.370 


2.634 


2.925 


23 


1.974 


2.206 


2.465 


2.752 


3.072 


34 


2.033 


2.283 


2.563 


2.876 


3.225 


25 


2.094 


2.363 


2.666 


3.005 


3.386 


26 


2.157 


2.446 


2.773 


3.141 


3.556 


27 


2.221 


2.532 


2.883 


3.282 


3.734 


28 


2.288 


2.620 


2.999 


3.430 


3.920 


29 


2.357 


2.712 


3.119 


3.584 


4.116 


30 


2.427 


2.807 


3.243 


3.745 


4.322 


31 


2.500 


2.905 


3.373 


3.914 


4.538 


32 


-2.575 


3.007 


3.508 


4.090 


4.765 


33 


2.652 


3.112 


3.648 


4.274 


5.003 


34 


2.732 


3.221 


3.794 


4.466 


5.253 


35 


2.814 


3.334 


3.946 


4.667 


5.516 


36 


2.898 


3.450 


4.104 


4.877 


5.792 


37 


2.985 


3.571 


4.268 


5.097 


6.081 


38 


3.075 


3.696 


4.439 


5.326 


6.386 


39 


3.167 


3.825 


4.616 


5.566 


6.705 


40 


3.262 


3.959 


4.801 


5.816 


7.040 


41 


3.360 


4.098 


4.993 


6.078 


7.392 


42 


3.461 


4.241 


5.193 


6.352 


7.762 


43 


3.565 


4.390 


5.101 


6.637 


8.150 


44 


3.672 


4543 


5*617 


6.936 


8.557 


45 


3.782 


4.702 


5.841 


7.248 


8.985 


46 


3.895 


4.867 


6.075 


7.574 


9.434 


47 


4.012 


5.037 


6.318 


7.915 


9.906 


48 


4.132 


5.214 


6.571 


8.272 


10.401 


49 


4.256 


5.396 


6.833 


8.644 


10.921 


50 


4.384 


5.585 


7.107 


9.033 


11.4K7 



No. 5. 

to compounded annually, for \ to 50 years. 



221 



6 

Per cent. 


7 

Per cen . 


8 

Per cent. 


„ 9 

Per cent. 


Per cent. 


Years. 


Col. 6. 


Col. 7. 


Col. 8. 


Col. 9. 


Col. 10. 




$1,060 


$ 1.070 


$ 1.080 


$ 1.090 


$ 1.100 


1 


1.124 


1.145 


1.166 


1.188 


1.210 


2 


1.191 


1.225 


1.260 


1.295 


1.331 


3 


1.263 


1.311 


1.361 


1.412 


1.464 


4 


1.338 


1.403 


1.469 


1.539 


1.611 


5 


1.419 


1.501 


1.587 


1.677 


1.772 


6 


1.504 


1.606 


1.714 


1.828 


1.949 


7 


1.594 


1.718 


1.851 


1.993 


2.144 


8 


1.690 


1.839 


1.999 


2.172 


2.358 


9 


1.791 


1.967 


2.159 


2.367 


2.594 


10 


1.898 


2.105 


2.332 


2.580 


2.853 


11 


2.012 


2.252 


2.518 


2813 


3.138 


12 


2.133 


2.410 


2.720 


3.066 


3.452 


13 


2.261 


2.579 


2.937 


3.342 


3.798 


14 


2.397 


2.759 


3.172 


3.643 


4.177 


15 


2.540 


2.952 


3.426 


3.970 


4.595 


16 


2.693 


3.159 


3.700 


4.328 


5.055 


17 


2.854 


3.380 


3.996 


4.717 


5.560 


18 


3.026 


3.617 


4.316 


5.142 


6.116 


19 


3.207 


3.870 


4.661 


5.604 


6.728 


20 


3.400 


4.141 


5.034 


6.109 


7.400 


21 


3.604 


4.430 


5.437 


6.659 


8.140 


22 


3 820 


4.741 


5.872 


7.258 


8.954 


23 


4.049 


5.072 


6.341 


7.911 


9.850 


24 


4.292 


5.427 


6.849 


8.623 


10.835 


25 


4.549 


5.807 


7.396 


9.399 


11 918 


26 


4.822 


6.214 


7.988 


10.245 


13.110 


27 


5.112 


6.649 


8.627 


11.167 


14.421 


28 


5.418 


7.114 


9.317 


12.172 


15.863 


29 


5.744 


7.612 


10.063 


13.268 


17.449 


30 


6.088 


8.145 


10.868 


14.462 


19.194 


31 


6 453 


8.715 


11.737 


15.763 


21.114 


32 


6.841 


9 325 


12.676 


17.182 


23.225 


33 


7.251 


9.978 


13.690 


18.728 


25.548 


34 


7.686 


10.677 


14.785 


20.414 


28.102 


35 


8.147 


11.424 


15.968 


22.251 


30.913 


36 


8.6S6 


12.224 


17.246 


24.254 


34.004 


37 


9.154 


13.079 


18.625 


26.437 


37.404 


38 


9.704 


13.995 


20.115 


28.816 


41.145 


39 


10.286 


14.975 


21725 


31.409 


45.259 


40 


10.903 


16.023 


23.463 


34.236 


49.785 


41 


11.557 


17.144 


25.340 


37.318 


54.764 


42 


12.251 


18.344 


27.367 


40.676 


60.240 


43 


12!986 


19.629 


29.556 


44.337 


66.264 


44 


13.765 


21.003 


31.920 


48.327 


72.891 


45 


14.591 


22.473 


34.474 


52.677 


80.180 


46 


15.466 


24.046 


37.232 


57.418 


88.198 


47 


16.394 


25.729 


40.211 


62.585 


97.017 


48 


17.378 


27.530 


43.427 


68.218 


106.719 


49 


18.420 


29.457 


46.902 


74.358 


117.391 


50 



222 



TABLE 

Showing how much $1.00 per annum 

annually, for 





3 


3% 


4 


454 


„ 5 


Years. 


Per cent. 


Per cent. 


Per cent. 


Per cent. 


Per cent. 




Col. i. 


Col. 2. 


Col. 3. 


Col. 4. 


Col. 5. 


1 


1.030 


1.035 


1.040 


1.045 


1.050 


2 


2.091 


2.106 


2.122 


2.137 


2. J 53 


3 


3.184 


3.215 


3 247 


3.278 


3.310 


4 


4.309 


4.363 


4.416 


4.471 


4.526 


5 


5.468 


5.550 


5.633 


5.717 


5.802 


6 


6.663 


6 779 


6.898 


7.019 


7.142 


7 


7.892 


8.052 


8.214 


8.380 


8.549 


8 


9.159 


9.369 


9.583 


9.802 


10.027 


9 


10.464 


10.731 


11.006 


11.288 


11.578 


10 


11.808 


12. 142 


12.486 


12.841 


13.207 


11 


13.192 


13.602 


14.026 


14.464 


14.917 


12 


14.618 


15.113 


15.627 


16.160 


16.713 


13 


16.086 


16.677 


17.292 


17.932 


18.599 


14 


17.599 


18.296 


19.024 


19.784 


20,579 


15 


19.157 


19.971 


20.825 


21.719 


22.658 


16 


20.762 


21.705 


22.698 


23.742 


24.840 


17 


22.414 


23.500 


24.645 


25.855 


27.132 


18 


24.117 


25.357 


26.671 


28.064 


29.539 


19 


25.870 


27.280 


28.778 


30.371 


32.066 


20 


27.677 


29.270 


30.969 


32.783 


34.719 


21 


29.537 


31.329 


33.248 


35.303 


37.505 


22 


31.453 


33.460 


35.618 


37.937 


40.431 


23 


33.427 


35.667 


38.083 


40.689 


43.502 


24 


35.459 


37.950 


40.646 


43.565 


46.727 


25 


37.553 


40.313 


43.312 


46 571 


50.114 


26 


39.710 


42.759 


46.084 


49.711 


53.669 


27 


41.931 


45.291 


48.968 


52.993 


57.403 


28 


44.219 


47.911 


51.966 


56.423 


61.323 


29 


46.575 


50.623 


55.085 


60.007 


65.439 


30 


49.003 


53 430 


58.328 


63.752 


69.761 


31 


51.503 


56.335 


61.702 


67.666 


74.299 


32 


54.078 


59.341 


65.210 


71.756 


79.064 


33 


56.730 


62.453 


68.858 


76.030 


84.067 


34 


59.462 


65.674 


72.652 


80.497 


89.320 


35 


62.276 


69.008 


76.598 


85.164 


94.836 


36 


65.174 


72.458 


80.702 


90.041 


100.628 


37 


68.159 


76.029 


84.970 


95.138 


106.710 


38 


71.234 


79.725 


89.409 


100.464 


113.095 


39 


74.401 


83.550 


94.026 


106.030 


119.800 


40 


77.663 


87.510 


98.827 


111.847 


126.840 


41 


81.023 


91.607 


103.820 


117.925 


134.232 


42 


84.484 


95.849 


109.012 


124.276 


141.993 


43 


88.048 


100.238 


114.413 


130.914 


150.143 


44 


91.720 


104.782 


120.029 


137„850 


158.700 


45 


95.502 


109.484 


125.871 


145.098 


167.685 


46 


99.397 


114.351 


131.945 


152 673 


177.119 


47 


103.408 


119.388 


138.263 


160.588 


187.025 


48 


107.541 


124.602 


144.834 


168.859 


197.427 


49 


111.797 


129.998 


151.667 


177.503 


208.348 


50 


116.182 


135.583 


159.274 


186.536 


219.815 



No. 6. 

will amount to, compounded, 
I to 50 years. 



223 



6 

Per cent. 



Col. 6. 
1.060 

2 184 

8.375 

4.637 

5.975 

7.394 

8.898 

10.491 

12.181 

13.972 

15.870 

17.882 

20.015 

22.276 

24.673 

27,213 

29.906 

32.760 

35.786 

38.993 

42.392 

45.996 

49.816 

53.865 

58.156 

62.706 

67.528 

72.640 

78.058 

83.802 

89.890 

96.343 

103.184 

110.435 

118.121 

126.268 

131.904 

144.059 

153 762 

164.048 

174.951 

186.508 

198.758 

211.744 

225.508 

240.099 

255.565 

271.958 

289.336 

307.756 



7 

Per cent. 



Col. 7 . 

1.070 

2.215 

3.440 

4.751 

6.153 

7.654 

9.260 

10.978 

12.816 

14.784 

16.889 

19.141 

21.551 

24.129 

26.888 

29.840 

32.999 

36.379 

39.996 

43.865 

48.006 

52.436 

57.177 

62.249 

67.677 

73.484 

79.698 

86.347 

93.461 

101.073 

109.218 

117.933 

127.259 

137.237 

147.914 

159.337 

171.561 

184.640 

198.635 

213.610 

229.632 

246.777 

265.121 

284.749 

305.752 

328.224 

352.270 

377.999 

405.529 

434.986 



8 

Per cent. 



Col. 8. 

1.080 

2.246 

3.506 

4.867 

6.336 

7.923 

9.637 

11.488 

13.487 

15.646 

17.977 

20.495 

23.215 

26.152 

29.324 

32.750 

36.450 

40.446 

44.762 

49.423 

54.457 

59.893 

65.765 

72.106 

78.954 

86.351 

94.339 

102.966 

112.283 

122.346 

133.214 

144.951 

157.627 

171.317 

186.102 

202.070 

219.316 

237.941 

258.057 

279.781 

303.244 

328.583 

355.950 

385.506 

417.426 

451.900 

489.132 

529.343 

572.770 

619.672 



9 

Per cent. 



Col. g. 

1.090 

2.278 

3.573 

4.985 

6,523 

8.200 

10.029 

12.021 

14.193 

16.560 

19.141 

21.953 

25.019 

28.361 

32.003 

35.974 

40.301 

45.019 

50.160 

55.765 

61873 

68.532 

75.790 

83.701 

92.324 

101.723 

111.968 

123.135 

135.308 

148.575 

163.037 

178.800 

195.982 

214.711 

235.125 

257.376 

281.630 

308.067 

336.882 

368.292 

402.528 

439.846 

480.522 

524.859 

573.186 

625.863 

683.280 

745.866 

814.084 

888.441 



10 

Per cent 



Col. io. 

1.100 

2.310 

3.641 

5.105 

6.716 

8.487 

10.436 

12.580 

14.937 

17531 

20.384 

23.523 

26.975 

30 773 

34 950 

39.545 

44.599 

50.159 

56.275 

63.003 

70.403 

78.543 

87.497 

97.347 

108.182 

120.100 

133.210 

147.631 

163.494 

180 943 

200.138 

221.252 

244.477 

270.024 

298.127 

329.040 

363.043 

400.448 

441.593 

486.852 

536.637 

591.401 

651.641 

717.905 

790.795 

870.975 

959.172 

1,056.190 

1,162.909 

1,280.299 



Years. 



1 

2 
3 
4 
5 
6 
7 
8 
9 

10 
11 
12 
13 
14 
15 
16 
17 
18 
19 
20 
21 
22 
23 
24 
25 
26 
27 
28 
29 
30 
31 
32 
33 
34 
35 
36 
37 
38 
39 
40 
41 
42 
43 
44 
45 
46 
47 
48 
49 
50 



224 



TABLE 

Showing how much $l.OO per annum, for 

annually for 





3 


3% 


4 


4 1 /* 


„ 5 


Years. 


Per cent. 


Per cent. 


Per cent. 


Per cent. 


Per cent. 




Col. i. 


Col. 2. 


Col. ^. 


Col. 4. 


Col. 5. 


11 


12.16 


12.57 


12.99 


13.42 


13.87 


12 


12.53 


13 00 


1351 


14.02 


14.56 


13 


12.90 


13.46 


14.05 


14.65 


15.29 


14 


13.29 


13.93 


14.61 


15.31 


16.05 


15 


13.69 


14.42 


15.19 


16.00 


16.86 


16 


14.10 


14.93 


15.80 


16.72 


17.70 


17 


14.52 


15.45 


16.43 


17.48 


18.58 


18 


14.96 


15.99 


17.09 


18.26 


19.51 


19 


15.41 


16.55 


17.77 


19.08 


20.49 


20 


15.87 


17.13 


18.48 


19.94 


21.51 


21 


16.34 


17.73 


19.22 


20.84 


22.59 


22 


16.84 


18.35 


19.99 


21.78 


23.72 


23 


17.34 


18.99 


20.79 


22.76 


25.60 


24 


17.86 


19.65 


21.62 


23.78 


26.15 


25 


18.40 


20.34 


22.49 


24.85 


27.46 


26 


18.95 


21.05 


23.39 


25.97 


28.83 


27 


19.52 


21,79 


24.32 


27.14 


30.27 


28 


20.10 


22.55 


25.29 


28.36 


31.78 


29 


20.71 


23.34 


26.31 


29.64 


33.37 


30 


21.33 


24.16 


27.36 


30.97 


35.04 


31 


21.97 


25.01 


28.45 


32.36 


36.79 


32 


22.62 


25.88 


29.59 


33.82 


38.63 


33 


23.30 


26.79 


30.78 


35.34 


40.56 


34 


24.00 


27.72 


32.00 


36 93 


42.59 


35 


24.72 


28.69 


33.29 


38.59 


44.72 


36 


25.46 


29.70 


34.62 


40.33 


46.96 


37 


26.23 


30.74 


36.00 


42.14 


49.31 


38 


27.02 


31.81 


37.44 


44.04 


51.77 


39 


27.82 


32.93 


38.94 


46.02 


54.36 


40 


28.67 


34.08 


40.50 


48.09 


57.08 


41 


29.52 


35.27 


42.12 


50.26 


59.93 


42 


30.41 


36.51 


43.80 


52.52 


62.93 


43 


31.32 


37.78 


45.56 


54.88 


66.08 


44 


32.26 


39.11 


47.38 


57.35 


69.38 


45 


33.23 


40.48 


49.27 


59.93 


72.85 


46 


34.22 


41.89 


51.24 


62.63 


76.49 


47 


35.25 


43.36 


53.29 


65.45 


80.32 


48 


36.31 


44.88 


55.42 


68.39 


84.33 


49 


37.40 


46.45 


57.64 


71.47 


88.55 


50 


38.52 


48.07 


59.95 


74.69 


92.98 



No. 7. 

10 years, will amount to compounded 

11 to 50 years. 



225 



6 

Per cent. 


7 

Per cent. 


„ 8 

Per cent. 


„ 9 

Per cent. 


Per cent. 


Years. 


Col. 6. 


Col. 7. 


Col. 8. 


Col. 9 . 


Col. io. 




14.81 


15.82 


16.90 


18.05 


19 28 


11 


15.70 


16.93 


18.25 


19.67 


21.21 


12 


16.64 


18.11 


19.71 


21.45 


23.33 


13 


17.64 


19.38 


21.29 


23.38 


25.67 


14 


18.70 


20.74 


22.99 


25.48 


28.23 


15 


19.82 


22.19 


24.83 


27.77 


31.06 


16 


21.01 


23.74 


26.81 


30.27 


34.16 


17 


22.17 


25.40 


28.96 


33.00 


37.58 


18 


23.61 


27.18 


31.28 


35.97 


41.34 


19 


25.02 


29.08 


33.78 


39.20 


45.47 


20 


26.52 


32.75 


36.48 


42.73 


50.02 


21 


28.11 


33.30 


39.40 


46.58 


55.01 


22 


29.80 


35.63 


42.55 


50.77 


60.52 


23 


31.59 


38.12 


45.95 


55.34 


66.57 


24 


33.48 


40.79 


49.63 


60.32 


73.23 


25 


34.98 


43.64 


53.60 


65.74 


80.56 


26 


37.62 


46.70 


57.89 


71.67 


88.61 


27 


39 88 


49.97 


62.52 


78.11 


97.47 


28 


42.27 


53.46 


67.52 


85.15 


107.20 


29 


44.81 


57.21 


72.92 


92.80 


117.94 


30 


47.50 


61.21 


78.76 


101.16 


129.73 


31 


50.35 


65.50 


85.06 


110.27 


142.70 


32 


53.37 


70.08 


91.86 


120.19 


156.90 


33 


56.57 


74.99 


99.21 


131.01 


172.68 


34 


59.86 


80.24 


107.15 


142.80 


189.95 


35 


63.56 


85.85 


115.72 


155.65 


208.94 


36 


67.38 


91.86 


124.99 


169.66 


229.83 


37 


71.42 


98.29 


134.98 


184.93 


252.80 


38 


75.70 


105.17 


145.77 


201.54 


278.05 


39 


80.25 


112.54 


157.44 


219.72 


305.90 


40 


85.17 


120.41 


170.03 


239.46 


336.49 


41 


90.16 


128.84 


183.63 


260.99 


370.08 


42 


95.57 


137.86 


198.32 


284.51 


407.16 


43 


101.31 


147.51 


214.19 


310.14 


447.88 


44 


107.39 


157.84 


231.32 


338.06 


492.63 


45 


113.83 


168.89 


249.83 


368.47 


541.71 


46 


120.6-6 


180.71 


269.82 


401.59 


, 596.06 


47 


127.90 


193.36 


291.40 


437.79 


! 655.67 


48 


135.57 


206.89 


314.71 


■ : 477.20 


721 23 


49 


143.71 


221.38 


339.89 


i 520.14 


793.45 


; 50 

! 

! 



226 



Showing how much $1.00 per annum 

annually for 16 



Years. 


3 


Z% 


4 


4^ 


5 


Per cent. 


Per cent. 


Per cent. 


Per cent. 


Per cent. 




Col. i. 


Col. u. 


Col. 3 . 


Col. 4. 


Col. 5. 


16 


19.73 


20.67 


21.66 


22.70 


23.79 


17 


20.32 


21.39 


22.52 


23.71 


24.98 


18 


20.93 


22.14 


23.43 


24.79 


26.23 


19 


21.56 


22.92 


24.36 


25.90 


27.54 


20 


22.21 


23.72 


25.34 


27.07 


28.72 


21 


22.88 


24.55 


26.35 


28.29 


30.36 


22 


23.56 


25.41 


27.40 


29 55 


31.88 


23 


24.27 


26.30 


28.50 


30.89 


33.48 


24 


25.00 


27.27 


29.64 


32.28 


35.15 


25 


25.74 


28.16 


30.82 


33.73 


36.91 


26 


26.52 


29.06 


32.06 


35.25 


38.75 


27 


27.31 


30.18 


33.34 


36.83 


40.69 


28 


28.13 


31.23 


34.67 


38.50 


42.72 


29 


28.98 


32.33 


36.06 


40.22 


44.87 


30 


29 85 


33.46 


37.50 


42.03 


47.11 


31 


30.74 


34.63 


39.00 


43.93 


49.46 


32 


31.66 


35.84 


40.56 


45.90 


51.93 


33 


32.61 


37.10 


42.19 


47.97 


54.53 


34 


33.59 


38.39 


43.87 


50.12 


57.26 


35 


34.60 


39.74 


45.63 


52.39 


60.12 


36 


35.64 


41.13 


47 45 


54.73 


63.12 


37 


36.71 


41.97 


49.35 


57.20 


66.28 


38 


37.81 


44.06 


51.33 


59.78 


69.59 


39 


38.94 


45.60 


53.38 


62.47 


73.07 


40 


40.11 


47.20 


55.51 


65.28 


76.73 


41 


41.31 


48 05 


57.74 


68.21 


80.56 


42 


42.55 


50.56 


60.05 


71.29 


84.59 


43 


43.83 


52.33 


62.45 


74.50 


88.82 


44 


45.15 


54.16 


64.95 


77.84 


93.36 


45 


46.50 


56.05 


67.54 


81.34 


97.92 


46 


47.89 


58.02 


70.24 


85.00 


102.82 


47 


49.33 


60.05 


73.05 


88.80 


107.96 


48 


50.81 


62.14 


75.98 


92.82 


113.36 


49 


52.84 


64.32 


79.01 


97.00 


119.03 


50 


53.90 


66.58 


82.18 


101.38 


124.98 



No. 8. 

for 15 years will amount to, compounded 
to 50 years. 



227 



6 

Per cent. 



Col. 6. 

26.15 
27.72 
29.39 
31.15 
33.02 

35.00 
37.10 
39.32 
41.68 
44.18 

46.84 
49.65 
52.62 
55.78 
59.13 

62.68 
66.44 
70.42 
74.65 
79.13 

83.88 
88.91 
94.24 
99.90 
105.89 

112.25 
118.98 
126.12 
133.69 
141.71 

150.21 
159.22 

168.77 
178.90 
189.64 



Per cent. 



Col. 7. 

28.77 
30.78 
32.94 
35.24 
37.71 

40.35 
43.18 
46.20 
49.43 

52.89 

56.60 
60.56 
64.79 
69.33 

74.18 

79.38 
84.93 
90.88 
97.24 
104.05 

111.33 
119.12 
127.46 
136.39 
145.93 

156.05 
167.08 

178.77 
191.29 
204.68 

219.01 
234.34 
250.74 
268.29 

287.07 



„ 8 

Per cent. 



Col. 8. 

31.67 
34.20 
37.04 
39.90 

43.08 

46.53 
50.26 
54.28 
58.62 
63.31 

68.37 
73.84 
79.75 
86.13 
93.02 

100.46 
108.50 
117.18 
126.55 
136.68 

147.61 
159.42 
172.18 
185.95 

200.83 

216.89 
234.25 
252.98 
273.22 
295.08 

318 69 
344.18 
371.71 
401.45 
433.57 



„ 9 

Per cent. 



Col 9. 

34.88 
38.02 
41.44 
45.18 
49.24 

53.67 

58.50 
63.77 
69.51 

75.75 

82.57 

90.02 

98.12 

106.95 

116.57 

127.05 
138.50 
150.96 
164.55 
179.35 

195.50 
213.10 
232.28 
253.18 
275.97 

300.80 
327.88 
357.38 
389.48 
424.61 

462.77 

504.37 
549.82 
599.36 
653.32 



Per cent. 



Col. 10. 

38.44 
42.29 
46.52 
51.17 
56.27 

61.92 
68.11 
74.92 
82.41 
90.65 

99.71 
109.67 
120.65 
132.72 

145.98 

160.59 
176.64 
194.32 
213.74 
235.11 

258.63 
284.49 
312.94 
344.24 
378.67 

416.53 
458.19 
503.98 
554.30 
609.84 

670.68 
737.79 
811.71 

892.88 
982.09 



Years, 



16 
17 
18 
19 
20 



22S 



TABLE 

Showing how much $1.00 per annum 

annually for 21 



Years. 


„ 3 

Per cent. 


3% 

Per cent. 


„ 4 

Per cent. 


4^ 

Per cent. 


5 

Per cent. 




Col. i. 


Col. 54. 


Col. 3. 


Col. 4. 


Col 5. 


21 


28.51 


30.29 


32.21 


34.26 


36.46 


22 


29.36 


31.35 


33.50 


35.80 


38.28 


23 


30.24 


32.45 


34.84 


37.41 


40.19 


24 


31.15 


33.59 


36.23 


39.09 


42.20 


25 


32.09 


34.76 


37.68 


40.85 


44.31 


26 


33.05 


35.99 


39.18 


42.69 


46.53 


27 


34.04 


37.24 


40.75 


44.61 


48.85 


28 


35.06 


38.54 


42.38 


46.62 


51.30 


29 


36.11 


39.89 


44.08 


48.72 


53.86 


30 


37.19 


41.29 


45.84 


50.91 


56.55 


31 


38.31 


42.73 


47.68 


53.20 


59.38 


32 


39.46 


44.23 


49.58 


55.60 


62.35 


33 


40.64 


45.78 


51.56 


58.10 


65.47 


34 


41.86 


47.38 


53.63 


60.71 


68.74 


35 


43.12 


49.04 


55.77 


63.45 


72.18 


36 


44.41 


50.75 


58.01 


66.30 


75.79 


37 


45.74 


52.53 


60.32 


69.28 


79.58 


38 


47.12 


54.37 


63.67 


72.40 


83 56 


39 


48.53 


56.27 


65.25 


75.66 


87.74 


40 


49.99 


58.24 


67.86 


79.06 


92.12 


41 


51.49 


60.28 


70.57 


82.62 


96.73 


42 


53.03 


62.39 


73.39 


86.34 


101.55 


43 


55.02 


64.57 


76.33 


90.23 


106.64 


44 


56.26 


66.83 


79.38 


94.28 


111.97 


45 


57.95 


69.17 


82.56 


98.53 


117.57 


46 


59.69 


71.59 


85.86 


102.96 


123.45 


47 


61.48 


74.10 


89.30 


107.49 


129.62 


48 


63.32 


76.69 


92.88 


112.44 


136.10 


49 


65.22 


79.38 


96.58 


117.49 


142.91 


50 


67.18 

i 

1 


82.15 

i 
i 


100.45 

i 


122.78 


150.05 



No. 9. 

for 20 years will amount to, compounded 
to 50 years. 



229 



6 

Per cent. 



Col. 6. 

41.33 
43.81 
46.44 
49.23 
52.18 

55.31 
58.63 
62.15 
65.88 
69.83 

74.02 
78.46 
83.17 
88.16 
93.45 

99.05 
104.99 
111.30 
117.98 
125.05 

132.56 
140.51 
148.94 

157.88 
167.35 

177.39 
188.03 
199.32 
211.28 
223.95 



7 

Per cent. 



Col. 7. 

46.94 
50.22 
53.73 
57.50 
61.53 

65.83 
70.44 
75.37 
80.65 
86.29 

92.33 

98.79 
105.71 
113.11 
120.62 

129.50 
138.56 
148.26 
159.55 
169.75 

181.63 
194.34 
207.94 
222.50 

238.07 

254.74 
272.57 
291.65 
312.07 
333.92 



8 

Per cent. 



Col. 8. 

53.38 
57.65 
62.26 
67.24 

72.62 

78.43 
84.70 
91.48 
98.80 
106.70 

115.13 
124.45 
134.41 
145.16 
156.78 

169.32 

182 86 
197.49 
213.29 
230.36 

248.79 
268.69 
290.19 
313.40 
838.47 

365.55 

394.80 
426.38 
460.49 
497.33 



„ 9 

Per cent. 



Col. 9. 

60.78 
66.25 

72.22 
78.72 
85.80 

93.52 
101.94 
111.08 
121.11 
131.99 

143.87 
156.85 
170.96 
186.35 
203.12 

221.39 
241.33 
263.04 

286.72 
312.50 

340.65 
371.31 
404.73 
441.16 

480.86 

524.13 
571.31 
622.72 
678.76 
739.87 



Per cent. 



Col. 10. 

69.30 
76.23 
83.86 
92.24 
101.47 

111.62 

122.77 
135.05 
148.55 
163.41 

179.75 
197.70 
217.48 
239.25 
263.16 

289.50 
318.45 
350.29 
385.32 
423.85 

466.22 
512.84 
564.12 
620.56 
682.61 

750.86 
825.96 
908.50 
999.41 
1099.36 



Years. 



21 

22 
23 
24 
25 

26 

27 
28 
29 
30 

31 
32 
33 
34 
35 

36 
37 

38 
39 
40 

41 
42 
43 
44 
45 

46 

47 
48 
49 
50 



230 



TABLE 

Showing the present value of $1.00 due 

50, in 



Years. 


3 


3% 


4 


4M 


5 


Per cent. 


Per cent. 


Per cent. 


Per cent. 


Per cent. 




Col. i. 


Col. -j. 


Col. 3. 


Col. 4. 


Col. 5. 


1 


.9709 


.9662 


.9615 


.9569 


.9524 


2 


.9426 


.9335 


.9246 


.9157 


.9070 


3 


.9151 


.9019 


.8890 


8763 


.8638 


4 


.8885 


.8714 


.8548 ' 


!8386 


.8227 


5 


.8626 


.8420 


.8219 


.8025 


.7835 


6 


.8375 


.8135 


.7903 


.7679 


.7462 


7 


.8131 


.7860 


.7599 


7348 


.7107 


8 


.7894 


.7594 


.7307 


.7032 


.6768 


9 


.7664 


.7337 


.7026 


.6729 


.6440 


10 


.7441 


.7089 


.6756 


.6439 


.6139 


11 


.7224 


.6849 


.6496 


.6162 


.5847 


12 


.7014 


.6618 


.6246 


.5897 


.5568 


13 


.6810 


.6394 


.6006 


.5643 


.5303 


14 


.6611 


.6178 


.5775 


.5400 


.5051 


15 


.6419 


.5969 


.5553 


.5167 


.4810 


16 


.6232 


.5767 


.5339 


.4945 


.4581 


17 


.6050 


.5572 


.5134 


.4732 


.4363 


18 


.5874 


.5384 


.4936 


.4528 


.4155 


19 


.5703 


.5202 


.4746 


.4333 


.3957 


20 


.5537 


.5026 


.4564 


.4146 


.3769 


21 


.5375 


.4856 


.4388 


.3968 


.3589 


22 


.5219 


.4692 


.4220 


.3797 


.3419 


23 


.5067 


.4333 


.4057 


.3634 


.3256 


24 


.4919 


.4380 


.3901 


.3477 


.3101 


25 


.4776 


.4231 


.3751 


.3327 


.2953 


26 


.4637 


.4088 


.3607 


.3184 


.2812 


27 


.4502 


.3950 


.3468 


.3047 


.2678 


28 


4371 


.3817 


.3335 


.2916 


.2551 


29 


.4243 


.3687 


.3206 


.2790 


.2429 


30 


.4120 


.3563 


.3083 


.2670 


.2314 


31 


.4000 


.3442 


.2965 


.2555 


.2204 


32 


.3883 


.3326 


.2851 


.2445 


.2099 


33 


.3770 


.3213 


.2741 


.2340 


.1999 


34 


.3660 


.3105 


.2636 


.2239 


.1904 


35 


.3554 


.3000 


.2534 


.2143 


.1813 


36 


.3450 


.2898 


.2437 


.2050 


.1727 


37 


.3350 


.2800 


.2343 


.1962 


.1644 


38 


.3252 


.2706 


.2253 


.1878 


.1566 


39 


.3158 


.2614 


.2166 


.1797 


.1491 


40 


.3066 


.2526 


.2083 


.1719 


.1420 


41 


.2976 


.2440 


.2003 


.1645 


.1353 


42 


.2890 


.2358 


.1926 


.1574 


.1288 


43 


.2805 


.2278 


.1852 


.1507 


.1227 


44 


.2724 


.2201 


.1780 


.1442 


.1169 


45 


.2644 


.2127 


.1712 


.1380 


.1113 


46 


.2567 


.2055 


.1646 


.1320 


.1060 


47 


.2493 


.1985 


.1583 


.1263 


.1009 


48 


.2420 


.1918 


.1522 


.1209 


.0961 


49 


.2350 


.1853 


.1463 


.1157 


.0916 


50 


.2281 


.1791 


.1407 


.1107 


.0872 



No. 10. 

in any number of years, from I to 
elusive. 



231 



6 


7 


8 


9 


IO 




Per cent. 


Per cen . 


Per cent. 


Per cent. 


Per cent. 


Years. 


Col. 6. 


Col. 7. 


Col. 8. 


Col. 9. 


Col.io. 




.9434 


.9346 


.9259 


.9174 


.9091 


1 


.8900 


.8734 


.8573 


.8417 


.8264 


2 


.8396 


.8163 


.7938 


.7722 


.7513 


3 


.7921 


.7629 


.7350 


.7084 


.6830 


4 


.7473 


.7130 


.6806 


.6499 


.6209 


5 


.7050 


.6663 


.6302 


.5963 


.5645 


6 


.6651 


.6228 


.5835 


.5470 


.5132 


7 


.6274 


.5820 


.5403 


.5019 


.4665 


8 


.5919 


.5439 


.5002 


.4604 


.4241 


9 


.5584 


.5083 


.4632 


.4224 


.3855 


10 


.5268 


.4751 


.4289 


.3875 


.3505 


11 


.4970 


.4440 


.3971 


.3555 


.3186 


12 


.4688 


.4150 


.3678 


.3262 


.2897 


13 


4423 


.3878 


.3405 


.2992 


.2633 


14 


.4173 


.3624 


.3152 


.2745 


.2394 


15 


.3936 


.3387 


.2919 


.2519 


.2176 


16 


.3714 


.3166 


.2703 


.2311 


.1978 


17 


.3503 


.2959 


.2502 


.2120 


.1799 


18 


.3305 


.2765 


.2317 


.1945 


.1635 


19 


.3118 


.2584 


.2145 


.1784 


.1486 


20 


.2942 


.2415 


.1987 


.1637 


.1351 


21 


.2775 


.2257 


.1839 


.1502 


.1228 


22 


.2618 


.2109 


1703 


.1378 


.1117 


23 


.2470 


.1971 


.1577 


.1264 


.1015 


24 


.2330 


.1842 


.1460 


.1160 


.0923 


25 


.2198 


.1722 


.1352 


.1064 


.0839 


26 


.2074 


.1609 


.1252 


.0976 


.0763 


27 


.1956 


.1504 


• .1159 


.0895 


.0693 


28 


.1846 


.1406 


.1073 


.0822 


.0630 


29 


.1741 


.1314 


.0994 


.0754 


.0573 


30 


.1643 


.1228 


.0920 


.0691 


.0521 


31 


.1550 


.1147 


.0852 


.0634 


.0474 


32 


.1462 


.1072 


.0789 


.0582 


.0431 


33 


.1379 


.1002 


.0730 


.0534 


.0391 


34 


.1301 


.0937 


.0676 


.0490 


.0356 


35 


.1227 


.0875 


.0626 


.0449 


.0323 


36 


.1158 


.0818 


.0580 


.0412 


.0294 


37 


.1092 


.0765 


.0537 


.0378 


.0267 


38 


.1031 


.0715 


.0497 


.0347 


.0244 


39 


.0972 


.0668 


.0460 


.0318 


.0221 


40 


.0917 


.0624 


.0426 


.0292 


.0201 


41 


.0865 


.0583 


.0395 


.0268 


.0183 


42 


.0816 


.0545 


.0365 


.0246 


.0166 


43 


0770 


.0509 


.0338 


.0226 


.0151 


44 


.0727 


.0476 


.0313 


.0207 


.0137 


45 


.0685 


.0445 


.0290 


.0190 


.0125 


46 


.0647 


.0416 


.0266 


.0174 


.0113 


47 


.0610 


.0389 


.0249 


.0160 


.0103 


48 


.0575 


.0363 


.0230 


.0147 


.0094 


49 


.0543 


.0339 


.0213 


.0134 


.0085 


50 



232 



TABLE 

Showing the present value of $1.00 per 

from | to 





3 


3^ 


4 


4% 


5 


Years 


Per cent. 


Per cent. 


Per cent. 


Per cent. 


Per cent. 




Col. i. 


Col. 2. 


Col. 3- 


Col. 4. 


Col. s. 


1 


.9709 


.9662 


0.9615 


0.9569 


0.9524 


2 


1.9135 


1.8997 


1.8861 


1.8727 


1.8594 


3 


2 8286 


2.8016 


2.7751 


2.7490 


2.7232 


4 


3.7171 


3.6731 


3.6299 


3.5875 


3.5460 


5 


4.5797 


4.5151 


4.4518 


4.3900 


4.3295 


6 


5.4172 


5.3286 


5.2421 


5.1579 


5.0757 


7 


6.2303 


6.1145 


6.0021 


5.8927 


5,7864 


8 


7.0197 


6.8740 


6.7327 


6.5959 


6.4632 


9 


7.7861 


7.6077 


7.4353 


7.2688 


7.1078 


10 


8.5302 


8.3166 


8.1109 


7.9127 


7.7217 


11 


9.2526 


9.0016 


8.7605 


8.5289 


8.3064 


12 


9.9540 


9.6633 


9.3851 


9.1186 


8.8633 


13 


10.6350 


10.3027 


9.9856 


9.6829 


9.3936 


14 


11.2961 


10.9205 


10.5631 


10 2228 


9.8986 


15 


11.9379 


11.5174 


11.1184 


10.7395 


10.3797 


16 


12.5611 


12.0941 


11.6523 


11.2340 


10.8378 


17 


13.1661 


12.6513 


12.1657 


11.7072 


11.2741 


18 


13.7535 


13.1897 


12.6593 


12.1600 


11.6896 


19 


14.3238 


13.7098 


13.1339 


12.5933 


12.0853 


20 


14.8775 


14.2124 


13.5903 


13.0079 


12.4622 


21 


15.4150 


14.6980 


14.0292 


13.4047 


12.8212 


22 


15.9369 


15.1671 


14.4511 


13.7844 


13.6030 


23 


16.4436 


15.6204 


14.8568 


14.1478 


13.4886 


24 


16.9355 


16.0584 


15.2470 


14.4955 


13.7986 


25 


17.4131 


16.4815 


15.6221 


14.8282 


14.0939 


26 


17.8768 


16 8904 


15.9828 


15.1466 


14.3752 


•27 


18.3270 


17.2854 


16.3296 


15.4513 


14.6430 


28- 


18.7641 


17.6670 


16.6631 


15.7429 


14.8981 


29 


19.1885 


18.0358 


16.9837 


16.0219 


15.1411 


30 


19.6004 


18.3920 


17.2920 


16.2889 


15 3725 


31 


20.0004 


18.7363 


17.5885 


16.5444 


15.5928 


32 


20.3888 


19.0689 


17.8736 


16.7889 


15.8027 


33 


20.7658 


19.3902 


18.1476 


17.0229 


16.0025 


34 


21 1318 


19.7007 


18.4112 


17.2468 


16.1929 


35 


21.4872 


20.0007 


18.6646 


17.4610 


16.3742 


36 


21.8323 


20.2905 


18.9083 


17.6660 


16.5469 


37 


22.1672 


20.5705 


19.1426 


17.8622 


16.7113 


38 


22.4925 


20.8411 


19.3679 


18.0500 


16.8679 


39 


22.8082 


21.1025 


19.5845 


18.2297 


17.0170 


40 


23.1148 


21.3551 


19.7928 


18.4016 


17.1591 


41 


23.4124 


21.5991 


19.9931 


18.5661 


17.2944 


42 


23.7014 


21.8349 


20.1856 


18.7235 


17.4232 


43 


23.9819 


22.0627 


20.3708 


18.8742 


17.5459 


44 


24.2543 


22.2828 


20.5488 


19.0184 


17.6628 


45 


24.5187 


22.4955 


20.7200 


19.1563 


17.7741 


46 


24.7754 


22.7009 


20.8847 


19.2884 


17.8801 


47 


25.0247 


22.8994 


21.0429 


19.4147 


17.9801 


48 


25.2667 


23.0912 


21.1951 


19.5356 


18.0772 


49 


25.5017 


23.2766 


21.3415 


19.6513 


18.1687 


50 


25.7298 


23.4556 


21.4852 


19.7620 


18.2559 



No. If. 

annum due in any number of years, 
50, inclusive. 



233 



6 

Per cent. 


I 7 

Per cent. 


8 

Per cent. 


„ 9 

Per cent. 


IO 

Per cent. 


Years. 


Col. 6. 


Col. 7. 


Col. 8. 


Col. 9. 


Col. 10. 




0.9434 


0.9346 


0.9259 


0.9174 


0.9091 


1 


1.8334 


1.8080 


1.7833 


1.7591 


1.7355 


2 


2.6730 


2.6243 


2.5771 


2.5313 


2.6849 


3 


3.4651 


2.3872 


3.3121 


3.2397 


3.1699 


4 


4.2124 


4.1002 


3.9927 


3.8897 


3.7908 


5 


4.9173 


4.7665 


4.6229 


4.4859 


4.3543 


6 


5.5824 


5.3893 


5.2064 


5.0330 


4 8684 


7 


6.2098 


5.9713 


5.7466 


5.5348 


5.3349 


8 


6.8017 


6.5152 


6.2469 


5.9952 


5.7590 


9 


7.3601 


7.0236 


6.7101 


6.4177 


6,1446 


10 


7.8869 


7.4987 


7.1390 


6.8052 


6.4951 


11 


8.3838 


7.9427 


7.5361 


7.1607 


6.8137 


12 


8.8527 


8.3577 


7.9038 


7.4869 


7.1034 


13 


9.2950 


8.7455 


8.2442 


7.7861 


7.3677 


14 


9.7122 


9.1079 


8.5595 


8.0607 


7.6061 


15 


10.1059 


9.4466 


8.8514 


8.3125 


7.8237 


16 


10.4773 


9.7632 


9.1216 


8.5436 


8.0216 


17 


10.8276 


10.0591 


9.3719 


8.7556 


8.2014 


18 


11.1501 


10.3356 


9.6036 


8.9501 


8.3649 


19 


11.4699 


10.5940 


9.8181 


9.1285 


8.5136 


20 


11.7641 


10.8355 


.10.0168 


9.2922 


8.6487 


21 


12.0416 


11.0612 


10.2007 


9.4424 


8.7715 


22 


12.3034 


11.2722 


10.3711 


9.5802 


8.8832 


23 


12.5504 


11.4693 


10.5288 


9.7066 


8.9847 


24 


12.7834 


11.6536 


10.6748 


9.8226 


9.0770 


25 


13.0032 


11.8258 


10.8100 


9.9290 


9.1609 


26 


13.2105 


11.9867 


10.9352 


10.0266 


9.2372 


27 


13.4062 


12.1371 


11.0511 


10.1161 


9.3066 


28 


13.5907 


12.2777 


11.1584 


10.1983 


9.3696 


29 


13.7648 


12.4090 


11.2578 


10.2736 


9.4269 


30 


13.9291 


12.5318 


11.3498 


10.3428 


9.4790 


31 


14.0840 


12.6466 


11.4350 


10.4062 


9.5264 


32 


14.2302 


12.7538 


11.5139 


10.4644 


9.5694 


33 


14.3681 


12.8540 


11.5869 


10.5178 


9.6086 


34 


14.4982 


12.9477 


11.6546 


10.5668 


9.6442 


35 


14.6210 


13.0352 


11.7172 


10.6117 


9.6765 


36 


14.7368 


13.1170 


11.7752 


10.6530 


9.7059 


37 


14.8460 


13.1935 


11.8289 


10.6908 


9.7327 


38 


14.9491 


13.2649 


11.8786 


10.7255 


9.7570 


39 


15.0463 


13.3317 


11.9246 


10.7573 


9.7791 


40 


15.1380 


13.3941 


11.9672 


10.7866 


9.7991 


41 


15.2245 


13.4524 


12.0067 


10.8134 


9.8174 


42 


15.3062 


13.5070 


12.0432 


10.8379 


9.8340 


43 


15.3832 


13.5579 


12.0771 


10.8605 


9.8491 


44 


15.4558 


13.6055 


12.1084 


10.8812 


9.8628 


45 


15.5244 


13.6500 


12.1374 


10.9002 


9.8753 


46 


15.5890 


13.6916 


12.1643 


10.9176 


9.8866 


47 


15.6500 


13.7305 


12.1891 


10.9336 


9.8969 


48 


15.7076 


13.7668 


12.2122 


10.9482 


9.9063 


49 


15.7619 


13.8007 


12.2335 


10.9617 


9.9148 


50 



234 



TABLE 

Showing how much money must be invested 

1 to 50 years, to 





3 


3^2 


4 


4V4 


5 


Years. 


Per cent. 


Per cent. 


Per cent. 


Per cent. 


Per cent. 




Col. i. 


Col. 2. 


Col. 3. 


Col. 4. 


Col. 5. 


1 


970.90 


966.20 


'961.54 


956.95 


952.38 


2 


478.26 


474.79 


471.34 


467.95 


464.58 


3 


314.11 


311.05 


308.02 


305.05 


302.11 


4 


232.07 


229.23 


226.43 


223.68 


220.97 


5 


182.87 


180.01 


177.53 


174.94 


172.36 


6 


150.10 


147.50 


144.96 


142.47 


140.02 


7 


126.70 


124.19 


121.74 


119.33 


116.97 


8 


109.18 


106.74 


104.35 


102.02 


99.73 


9 


95.57 


93.18 


90.86 


88.59 


86.37 


10 


84.69 


82.36 


80.09 


77.88 


75.72 


11 


75.80 


73.52 


71.30 


69.14 


67.04 


12 


68.41 


66.18 


63.99 


61.88 


59.83 


13 


62.16 


59.96 


57.83 


55.77 


53.77 


14 


56.82 


54.6.6 


52.57 


50.55 


48.59 


15 


52.20 


50.07 


48.02 


46.04 


44.14 


16 


48.16 


46.07 


44.06 


42.12 


40.26 


17 


44 61 


42 56 


40.58 


38.68 


36.86 


18 


41.47 


39.44 


37.50 


35.63 


33.85 


19 


38.66 


36 91 


34.75 


32 93 


31.19 


20 


36.13 


34.17 


32.29 


30.50 


28.80 


21 


33.86 


31.92 


30.08 


28.33 


26.66 


22 


31.71 


29.89 


28.08 


26.36 


24.73 


23 


29.91 


28.04 


26.26 


24.58 


22.99 


24 


28.20 


26.35 


24.60 


22.95 


21.40 


25 


26.63 


24.81 


23.09 


21.47 


19.96 


26 


25.18 


24.38 


21.70 


20.12 


18.63 


27 


23.85 


22.08 


20?42 


18.87 


17.42 


28 


22.62 


20.87 


19.24 


17.72 


16.31 


29 


21.48 


19.75 


18.16 


16.67 


15.28 


30 


20.41 


18.72 


17.14 


15.69 


14.34 


31 


19.42 


18.07 


16 21 


14.78 


13.46 


32 


18.49 


16.85 


15.34 


13.94 


12.65 


33 


17.63 


16.01 


14.52 


13.16 


11.90 


34 


16.82 


15.23 


13.76 


12.42 


11.20 


35 


16.06 


14.49 


13.06 


11.74 


10.55 


36 


15.34 


13.80 


12.39 


11.11 


9.94 


37 


14.67 


13.15 


11.77 


10.51 


9.37 


38 


14.04 


12.54 


11.19 


9 96 


8.84 


39 


13.44 


11.97 


10.64 


9.43 


8.35 


40 


12.88 


11.43 


10.12 


8.94 


7.88 


41 


12.34 


10.92 


9.63 


8.48 


7.45 


42 


11.84 


10:43 


9.17 


8.04 


7.04 


43 


11.36 


9.98 


8.74 


7.64 


6.66 


44 


10.90 


9.54 


8.33 


7.25 


6.30 


45 


10.50 


9.13 


7.94 


6.89 


5.97 


46 


10.06 


8.75 


7.58 


6.55 


5.65 


47 


9.67 


8.38 


7.23 


6.23 


5.35 


48 


9.30 


8.03 


6.91 


5.92 


5.06 


49 


8.94 


7.69 


6.59 


5.63 


4.80 


50 


8.61 


7.38 


6.30 


5.36 


4.55 



235 



NO. 12. 

every year, and compounded annually for 
amount to $1,000. 



6 

Per cent. 


Per cent. 


„ 8 

Per cent. 


„ 9 

Per cent. 


fO 

Per cent. 


Years. 


Col. 6. 


Col. 7 . 


Col. 8. 


Col. 9. 


Col. 10. 




943.40 


934.58 


925.93 


917.43 


909.09 


1 


457.96 


451.49 


445.16 


438.96 


432.90 


2 


296.33 


290.71 


285.22 


279.87 


274.65 


3 


215.65 


210.50 


205.48 


200.61 


195.88 


4 


167.35 


162.51 


157.83 


153.30 


148.91 


5 


135.25 


130.65 


126.22 


121.95 


117.83 


6 


112.39 


107.99 


103.77 


99.72 


95.82 


7 


95.32 


91.09 


87.05 


83.19 


79.49 


8 


82.10 


78.03 


74.14 


70.46 


66.95 


9 


71.57 


67.64 


63.92 


60.39 


56.91 


10 


63.01 


59.21 


55.63 


52.25 


49.06 


11 


55.92 


52.24 


48.79 


45.55 


42.51 


12 


49.96 


46.40 


43.08 


39.97 


37.07 


13 


44,89 


41.44 


38.24 


35.26 


32.50 


14 


40.53 


37.19 


34.10 


31.25 


28.61 


15 


36.75 


33.51 


30.53 


27.80 


25.29 


16 


33.44 


30.30 


27.44 


24.81 


22.42 


17 


30.53 


27.49 


24.72 


22.21 


19.94 


18 


27.94 


25.00 


22.34 


19.94 


17.77 


19 


25.65 


22.80 


20.23 


17.93 


15.87 


20 


23.59 


20.83 


. 18.36 


16.16 


14.20 


21 


21.74 


19.07 


16.70 


14.59 


12.73 


22 


20.07 


17.49 


15.21 


13.19 


11.43 


23 


18.57 


16.06 


13.87 


11.95 


10.27 


24 


17.20 


14.78 


12.67 


10.83 


9.24 


25 


15.95 


13.61 


11.58 


9.83 


8.33 


26 


14.81 


12.55 


10.60 


8.93 


7.51 


27 


13.77 


11.58 


9.71 


8.12 


6.77 


28 


12.81 


10.70 


8.91 


7.39 


6.12 


29 


11.93 


9.89 


8.17 


6.73 


5.53 


30 


11.12 


9.15 


7.51 


6.13 


5.00 


31 


10.38 


8.48 


6.90 


5.59 


4.52 


32 


9.69 


7.86 


6.34 


5.10 


4.09 


33 


9.05 


7.29 


5.84 


4.66 


3.70 


34 


8.47 


6.76 


5.37 


4.25 


3.35 


35 


7.92 


6.28 


4.95 


3.89 


3.04 


36 


7.41 


5.83 


4.56 


3.55, 


2.75 


37 


6.74 


5.42 


4.21 


3.25 


2.50 


38 


8.51 


5.03 


3.87 


2.97 


2.26 


39 


6.10 


4.68 


3.57 


2.72 


2.05 


40 


5.72 


4.35 


3.30 


2.48 


1.86 


41 


5.36 


4.05 


3.04 


2.27 


1.69 


42 


5.03 


3.77 


2.81 


2.08 


1.53 


43 


4.72 


3.51 


2.59 


1.91 


1.39 


44 


4.43 


3.27 


2.40 


1.74 


1.26 


45 


4.17 


3.05 


2.21 


1.60 


1.15 


46 


3.92 


2.84 


2.04 


1.46 


1.04 


47 


3.68 


2.65 


1.89 


1.34 


.95 


48 


3.46 


2.47 


1.75 


1.23 


.86 


49 


3.25 


2.30 


161 


1.13 


.78 


50 



236 



TABLE 

Showing how much money must be invested 

nually, to amount to $1,000 



Years. 


3 


3 l A 


4 


4^ 


5 


Per cent. 


Per cent. 


Per cent. 


Per cent. 


Per cent. 




Col. i. 


Col. K. 


Col. 3. 


Col. 4. 


Col. 5. 


11 


$82.22 


$79.57 


$77.01 


$74.52 


$72.11 


12 


79.83 


76.88 


74.05 


71.31 


68.68 


13 


77.5L 


74.29 


71.20 


68.24 


65.41 


14 


75.24 


71.77 


68.46 


65.30 


62.29 


15 


73.06 


69.34 


65 82 


62.49 


59.33 


16 


70.92 


67.00 


63.30 


59.80 


56.50 


17 


68.86 


64.73 


60.86 


57.22 


53.81 


18 


66.85 


62.58 


58.52 


54.76 


51.25 


19 


64.91 


60.43 


56.27 


52.40 ■ 


49.81 


20 


63.02 


58.39 


54.11 


50.14 


46.49 


21 


61.18 


56.41 


52.02 


47.99 


44.27 


22 


59.39 


54.50 


50.02 


45.92 


42.16 


23 


57.67 


52.65 


48.10 


43.94 


40.16 


24 


55.99 


50.98 


46.25 


42.05 


38.24 


25 


54.35 


49.16 


44.47 


40.24 


36.42 


26 


52.78 


47.50 


42.76 


38.51 


34.69 


27 


51.24 


45.89 


41.12 


36.85 


33.04 


28 


49.75 


44.34 


39.53 


35.26 


31.46 


29 


48.29 


42.84 


38.01 


33.74 


29.96 


30 


46.93 


41.39 


36.55 


32.29 


28.54 


31 


45.52 


40.00 


35.14 


30.90 


27.18 


32 


44.20 


38.65 


33.79 


29.58 


25.88 


33 


42.91 


37.34 


32.49 


28.30 


24.67 


34 


41.07 


36.07 


31.25 


27.08 


23 44 


35 


40.40 


34.85 


30.04 


25.91 


22.34 


36 


39.23 


33.67 


28.89 


24.79 


21.30 


37 


38.13 


32.53 


27.78 


23.73 


20.30 


38 


37.00 


31.41 


26.71 


22.71 


19.32 


39 


35.94 


30.36 


25.68 


21.73 


18.40 


40 


34.90 


29.34 


24.69 


20.79 


17.53 


41 


33.87 


28.35 


23.74 


19.90 


16.69 


42 


32.90 


27.40 


22.83 


19.04 


15.90 


43 


31.93 


26.47 


21.95 


18.22 


15.13 


44 


31.00 


25.57 


21.11 


17.44 


14.42 


45 


30.10 


24.71 


20.30 


16.68 


13.73 


46 


29.22 


23.87 


19.52 


15.97 


13.08 


47 


28.37 


23.06 


18.77 


15.30 


12.45 


48 


27.55 


22.29 


18.04 


14.62 


11.86 


49 


26.75 


21.53 


17.35 


14.00 


11.29 


50 


25.97 


20.80 


16.68 


13.40 


10.75 



237 



No. 13. 

every year, for 10 years, and compounded, an- 
in || to 50 years. 



6 


7 


8 


9 


1.0 


\/^ . ~„ 


Per cent. 


Per cent. 


Per cent. 


Per cent. 


Per cent. 


Years. 


Col. 6. 


Col. 7. 


Col. 8. 


Col. 9 . 


Col. io. 




$67.52 


$63.22 


$59.18 


$55.40 


$51.86 


11 


63.71 


59.08 


54.80 


50.83 


47.14 


12 


60.00 


55.22 


50.74 


46.63 


42.86 


13 


56.69 


51.60 


46.98 


42.78 


38.96 


14 


53.49 


48.23 


43.50 


39.25 


35.42 


15 


50.46 


45.07 


40.28 


36.01 


32.20 


16 


47.60 


42.12 


37.30 


33.03 


29.27 


17 


44.91 


39.40 


34.53 


30.31 


26.60 


18 


42.36 


36.79 


31.97 


27.80 


24.19 


19 


39.97 


34.39 


29.61 


25.51 


21.99 


20 


37.70 


32.14 


27.41 


22.87 


19.99 


21 


35.57 


30.03 


25.38 


21.47 


18.18 


22 


33.56 


28.07 


23,50 


19.71 


16.52 


23 


31.66 


26.23 


21.76 


18.07 


15.20 


24 


29.86 


24.52 


20.15 


16.58 


13.66 


25 


28.17 


22.91 


18.66 


15.21 


12.41 


26 


26.58 


21.41 


17.27 


13.95 


11.29 


27 


25.08 


20.01 


16.00 


12.80 


10.26 


28 


23.66 


18.70 


14.81 


11.74 


9.33 


29 


22.32 


17.48 


13.71 


10.78 


8.48 


30 


21.05 


16.34 


12.71 


9.89 


7.71 


31 


19.88 


15.27 


11.75 


9.07 


7.01 


32 


18.84 


14.27 


10.89 


8.32 


6.37 


33 


17.67 


13.33 


10.08 


7.63 


5.79 


34 


16.68 


12.46 


9.33 


7.00 


5.27 


35 


15.73 


11.64 


8.64 


6.43 


4.79 


36 


14.85 


10.90 


8.00 


5.90 


4.35 


37 


14.04 


10.17 


7.41 


5.41 


3.95 


38 


13.25 


9.51 


6.87 


4.96 


3.60 


39 


12.47 


8.90 


6.35 


4.55 


3.29 


40 . 


11.75 


8.30 


5.88 


4.18 


2.97 


41 


11.10 


7.76 


5.44 


3.83 


2,70 


42 


10.46 


7.26 


5.04 


3.51 


2.45 


43 


9.87 


6.77 


4.67 


3.23 


2.23 


44 


9.31 


6.33 


4.32 


2.96 


2.03 


45 


8.79 


5.92 


4.00 


2.72 


1.85 


46 


8.21 


5.53 


3.71 


2.44 


1.68 


47 


7.82 


5.17 


3.43 


2.29 


1.53 


48 


7.38 


4.83 


3.18 


2.10 


1.39 


49 


6.97 


4.52 


2.94 


1.92 


1.27 


50 



238 



TABLE 

Showing how much money must be invested 

nually, to amount to $1,000 



Years. 


n 3 

Per cent. 


3Y2 

Per cent. 


„ 4 

Per cent. 


Per cent. 


n 5 

Per cent. 




Col. i. 


Col. Z. 


Col. 3. 


Col. 4. 


Col. 5 . 


16 


$50.67 


$48.38 


$46.17 


44.06 


42.03 


17 


49 21 


46.75 


44.40 


42.15 


40.03 


18 


47.78 


45.15 


42 69 


40.34 


38.16 


19 


46 40 


43 64 


41.05 


38.61 


36.31 


20 


45.05 


42.16 


39.47 


36.95 


34.58 


21 


43.72 


40.73 


37.95 


35.35 


32.93 


22 


42.44 


39.36 


36.49 


33 83 


31.37 


23 


41.21 


38.03 


35.09 


32.38 


29.87 


24. 


40.01 


36.74 


33.74 


30.98 


28.45' 


25 


38.84 


35.50 


32.44 


29.71 


27.10 


26 


37.71 


34.30 


31.19 


28.37 


25.81 


27 


36.61 


33.14 


29.99 


27.15 


24.58 


28 


35.55 


32.02 


28.84 


25.98 


23.41 


29 


3451 


30.93 


27.73 


24.86 


22.29 


30 


33.51 


29.89 


26.66 


23.79 


21.22 


31 


32.53 


28.88 


25.64 


22.77 


20.22 


32 


31.58 


27.90 


24.65 


21.79 


19.26 


33 


30.66 


26.96 


23.70 


20.85 


18.34 


34 


29.77 


26.05 


22.79 


19.95 


17.47 


35 


28.90 


25.17 


21.92 


19.09 


16.63 


36 


28.06 


24.31 


21.07 


18.27 


15.84 


37 


27.25 


23.49 


20.26 


17.48 


15.09 


38 


26.45 


22.70 


19.48 


16.73 


14.37 


39 


25.68 


21.93 - 


18.73 


16.01 


13.69 


40 


24.93 


21.18 


18.01 


15.32 


13.03 


41 


24.21 


20.47 


17.32 


14.66' 


12.41 


42 


23.50 


19.78 


16.65 


14.03 


11.82 


43 


22.82 


19.11 


16.01 


13.42 


11.26 


44 


22.15 


18.46 


15.36 


12.85 


10.72 


45 


21.51 


17.83 


14.81 


12.29 


10.21 


46 


20.88 


17.24 


14.24 


11.76 


9.73 


47 


20.27 


16.65 


13.69 


11.26 


9.26 


48 


19.68 


16.09 


13.16 


10.77 


8.82 


49 


19.11 


15.55 


12.66 


10.31 


8.40 


50 


18.55 

i 


15.02 


12.17 


9.86 . 


8.00 



No. 14. 

every year, for 15 years, and compounded, an 
in 16 to 50 years. 



239 



n 6 

Per cent. 



Col. 6. 

$38.24 
36. 07 
34.03 
32.10 
30.29 

28.57 
26.96 
25.43 
23.99 
22.63 

21.35 
20.14 
19.00 
17.93 
16.91 

15.59 
15.05 
14.20 
13 39 
12.64 

11.25 
11.24 
10.61 
10.01 
9.44 

8.91 
8.40 
7.93 

7.48 
7.05 

6.66 
6.29 
5.93 
5.59 

5.27 



Per cent. 



Col. 7. 

$34.75 
32.48 
30.36 
28.37 
26 52 

24.78 
23.16 
21.65 
20.23 
18.91 

17.67 
16.51 
15.29 
14.42 
13.48 

12.60 
11.77 
11.00 
10.29 
9.62 



8.39 
7.85 
7.33 

6.85 

6.40 
5.99 
5.59 
5.23 

4.86 

4.57 

4.27 
3 99 
3.73 
3.49 



„ 8 

Per cent. 



n 9 

Per cent. 



Col. 8. 

$31.58 
29.24 
27.07 
25.07 
23.21 

21.49 
19.90 
18.43 
17.06 
15.79 

14.63 
13.54 
12.54 
11.61 
10.75 

9.96 
9.22 
8.54 
7.91 
7.32 

6.78 
6.21 
5.81 
5.38 
4.98 

4.62 
4.27 
3.95 
3.66 
3.39 

3.14 
2.91 
2.69 
2.49 
2.31 



Col. 9. 

$28.67 
26.30 
24.13 
22.14 
20.31 

18.63 
17.09 
15.68 
14.41 
13.20 

12.11 

11.11 

10.19 

9.36 

8.58 

7.87 
7.22 
6.63 
6.08 
5.58 

5.12 
4.69 
4.31 
3.95 
3.63 

3.33 
3.05 

2.80 
2.57 
2.36 

2.16 
1.98 
1.82 
1.67 
1.54 



IO 

Per cent. 



Col. 10. 

$26.01 
23.65 
21.50 
19.54 

17.77 

16.19 
14.68 
13.35 
12.14 
11.03 

10.03 
9.12 
8.29 
7.54 
6.85 

6.23 

5.67 
5.15 
4.68 
4.25 

3.87 
3.52 
3.10 
2.91 
2.65 

2.41 
2.18 
1.99 
1.84 
1.64 

1,49 
1.31 
1.23 
1.11 
1.01 



Years. 



16 
17 
18 
19 
20 

21 

22 
23 
24 
25 

26 
27 
28 
29 
30 

31 
32 
33 
34 
35 

36 
37 

38 
39 

40 

41 
42 
43 
44 
45 

46 

47 
48 
49 
50 



240 



TABLE 

Showing how much money must be in 
compounded, annually, to amount 



Years. 


3 


3 V* 


4 


4H 


„ 5 


Per cent. 


Per cent. 


Per cent. 


Per cent. 


Per cent. 




Col. i. 


Col. 2. 


Col. 3. 


Col. 4* 


Col. s. 


21 


$35.08 


$33.01 


$31.05 


$29.19 


$27.43 


22 


34.05 


31.90 


29.85 


27.93 


26,12 


23 


33.07 


30.81 


28.71 


26.73 


25.23 


24 


32.10 


29.77 


27.60 


25.58 


23.70 


25 


31.17 


28.77 


26.54 


24.48 


22.57 


26 


30.33 


27.79 


25.52 


23.42 


21.49 


27 


29.38 


26.85 


24.54 


22.42 


20.46 


28 


28.52 


25.95 


23.60 


21.45 


19.50 


29 


27.69 


25,07 


22.69 


20.53 


18.57 


30 


26.89 


24.22 


21.82 


19.64 


17.68 


31 


26.10 


23 49 


20.98 


18.80 


16.84 


32 


25.34 


22.51 


20.17 


17.99 


16.03 


33 


24 60 


21.85 


19.39 


17.21 


15.28 


34 


23.89 


21.11 


18.65 


16.47 


14.55 


35 


23.19 


20.40 


17.93 


15.76 


13.86 


36 


22.52 


19.70 


17.24 


15.08 


13.20 


37 


21.86 


19.04 


16.58 


14.43 


12.56 


38 


21.21 


18.39 


15.94 


13.81 


11.99 


39 


20.61 


17.77 


15.33 


13.21 


11.40 


40 


20.01 


1717 


14.40 


12.64 


10.86 


41 


19.42 


16.59 


14.17 


12.10 


10.34 


42 


18.86 


16.04 


13.63 


11.58 


9.85 


43 


18.31 


15.49 


13.10 


10.09 


9.38 


44 


17.77 


14.96 


12.60 


10.61 


8.93 


45 


17.25 


14.46 


12.11 


10.15 


8.51 


46 


16.75 


13.97 


11.65 


9.71 


8.10 


47 


16.27 


13.50 


11,20 


9.29 


7.72 


48 


15.58 


13.04 


10.74 


8.89 


7.35 


49 


15.33 


12.60 


10.35 


8.51 


7.00 


50 


14.89 


12.17 


9.96 


8.15 


6.66 



No. 15. 

vested, every year, for 20 years, 
to $1,000, in 21 to 50 years. 



241 



and 



6 " 

Per cent. 


7 

Per cent. 


8 

Per cent. 


9 

Per cent. 


IO 

Per cent. 


Years. 


Col. 6. 


Col. 7 . 


Col. 8. 


Col. 9 . 


Col. io. 




$24.19 


$21.31 


$18.74 


$16.45 


$14.43 


21 


22.83 


19.91 


17.35 


15.09 


13.12 


22 


21.53 


18.61 


16.06 


13.83 


11.23 


23 


20.31 


17.39 


14.87 


12.71 


10.84 


24 


19.17 


16.25 


13.77 


11.66 


9.86 


25 


18.08 


15.19 


12.75 


10.69 


8.96 


26 


17.06 


14.19 


11.80 


9.81 


8.15 


27 


16.09 


13.26 


10.93 


9.00 


7.42 


28 


15.18 


12.40 


10.12 


8.26 


6.73 


29 


14.32 


1158 


9 38 


7.57 


6.12 


30 


13.55 


10.83 


8.68 


6.95 


5.56 


31 


12.75 


10.12 


8.04 


6.38 


5.06 


32 


12.02 


9.46 


7.44 


5.85 


4.60 


33 


10.86 


8.84 


6.89 


5.37 


4.18 


34 


10.70 


8 27 


6.38 


4.92 


3.80 


35 


10.09 


7.72 


5.91 


4.52 


3.45 


36 


9 52 


7.22 


5.47 


4.14 


3.15 


37 


8.99 


6.75 . 


5.06 


3.80 


2.86 


38 


8.48 


6.30 


4.69 


3.49 


2.60 


39 


8 00 


5.89 


4.34 


3.20 


2.36 


40 


7.54 


5.51 


4.02 


2.93 


2.15 


41 


7.12 


5.15 


3.72 


2.69 


1.95 


42 


6.72 


4.81 


3.45 


2.48 


1.77 


43 


6.34 


4.50 


3.20 


2.27 


1.61 


44 


5.98 


4.20 


2.96 


2.08 


1.47 


45 


5.64 


3.93 


2.74 


1.91 


1.33 


46 


5.32 


3.67 


2.53 


1.75 


1.21 


47 


5.02 


3.43 


2.35 


1.61 


1.11 


48 


4.73 


3.20 


2.17 


1.47 


1.00 


49 


4.47 


2.99 


2.01 


1.35 


.91 


50 - 



242 



TABLE No. 16. 

Actuaries' Table of Mortality. 













Net Premiums. 




Number 


Deaths 


Per cent, of 
deaths to 


Expectation 


Actuaries' 4 


. per cent. 


Age. 


Level Ann. 


Natural 




living. 


each year 


the living. 


of life. 


Prem. to in- 
sure $1,000 
for life. 


Pr'm. to in- 
sure $IOOO 
one year. 




Col. i. 


Col. 2. 


Col- 3 . 


Col. 4. 


Col. 5. 


Col. 6. 


10 


100,000 


676 


.006760 


48.36 


10.43 


6.50 


11 


99,324 


674 


.006786 


47.68 


10.63 


6.53 


12 


98,650 


672 


.006812 


47.01 


10.84 


6.55 


13 


97,978 


671 


.006848 


46.33 


11.07 


6.59 


14 


97,307 


671 


.006896 


45.64 


11.30 


6.63 


15 


96,636 


671 


.006944 


44.96 


11.54 


6.68 


16 


95,965 


672 


.007003 


44.27 


11.80 


6.73 


17 


95,293 


673 


.007062 


43.58 


12.07 


6.79 


18 


94,620 


675 


.007134 


42.88 


12.35 


6.86 


19 


93,945 


677 


.007206 


42.19 


12.64 


6.93 


20 


93,268 


680 


.007291 


41.49 


12.95 


7.01 


21 


92,588 


683 


.007377 


40.79 


13.27 


7.09 


22 


91,905 


686 


.007464 


40.09 


13.61 


7.18 


23 


91,219 


690 


.007564 


39.39 


13.96 


7.27 


24 


90,529 


694 


.007666 


38.68 


14.33 


7.37 


25 


89,835 


698 


.007770 


37.98 


14.72 


7.47 


26 


89,137 


703 


.007887 


37.27 


15.13 


7.58 


27 


88,434 


708 


.008006 


36.56 


15.56 


7.70 


28 


87,726 


714 


.008139 


35.86 


16.01 


7.83 


29 


87,01.2 


720 


.008275 


35.15 


16.48 


7.96 


30 


86,292 


727 


.008425 


34.43 


16.97 


8.10 


31 


85,565 


734 


.008578 


33.72 


17.49 


8.25 


32 


84,831 


742 


.008747 


33.01 


18.04 


8.41 


33 


84,089 


750 


.008919 


32.30 


18.62 


8.58 


34 


83,339 


758 


.009095 


31.58 


19.23 


8.75 


35 


82,581 


767 


.009288 


30.87 


19.87 


8.93 


36 


81,814 


776 


.009485 


30.15 


20.54 


9.12 


37 


81,038 


785 


.009687 


29.44 


21.26 


9.31 


38 


80,253 


795 


.009906 


28.72 


22.02 


9.53 


39 


79,458 


805 


.010131 


28.00 


22.82 


9.74 


40 


78,653 


815 


.010362 


27.28 


23.68 


9.96 


41 


77,838 


826 


.010612 


26.56 


24.59 


10.20 


42 


77,012 


839 


.010894 


25.84 


25.55 


10.48 


43 


76,173 


857 


.011251 


25.12 


26.59 


10.82 


44 


75,316 


881 


.011697 


24.40 


27.68 


11.25 


45 


74,435 


909 


.012212 


23.69 


28.85 


11.74 


46 


73,526 


944 


.012839 


22.97 


30.08 


12.35 


47 


72,582 


981 


.013517 


22.27 


31.39 


13.00 


48 


71,601 


1,021 


.014260 


21.56 


32.77 


13.71 


49 


70,580 


1,063 


.015061 


20.87 


34.23 


14.48 


50 


69,517 


1,108 


.015939 


20.18 


35.78 


15.33 


51 


68,409 


1,156 


.016898 


19.50 


37.42 


16.25 


52 


67,253 


1,207 


.017947 


18.82 


39.15 


17.26 


53 


66,046 


1,261 


.019093 


18.16 


41.00 


18.36 


54 


64,785 


1,316 


.020313 


17.50 


42.95 


19.53 



TABLE NO. 16. —Continued. 
Actuaries' Table of Mortality. 



243 













Net Premiums. 
Actuaries' 4 per cent. 




Number 

T " 


Deaths 


Per cent, of 
deaths to 


Expectation 






Age. 


Level Ann. 


Natural 




living. 


each year. 


the living. 


of life. 


Prem. to in- 
sure $1,000 
for life. 


Pr'm. to in- 
sure $iooo 
one year. 




Col i. 


Col, 2. 


Col. 3 . 


Col. 4. 


Col. 5. 


Col. 6, 


55 


63,469 


1,375 


.021664 


16.86 


$45.03 


$20.83 


56 


62,094 


1,436 


.023126 


16.22 


47.23 


22.24 


57 


60,658 


1,497 


.024679 


15.59 


49.57 


23.73 


58 


59,161 


1,561 


.026386 


14.97 


52.07 


25.37 


59 


57,600 


1,627 


.028247 


14.37 


54.72 


27.16 


60 


55,973 


1,698 


.030336 


13.77 


57.56 


29.17 


61 


54,275 


1,770 


.032612 


13.18 


60.57 


31.36 


62 


52,505 


1,844 


.035120 


12.61 


63.78 


33.77 


63 


50,661 


1,917 


.037840 


12.05 


67.20 


36.38 


64 


48,744 


1,990 


.040826 


11.51 


70 84 


39.26 


65 


46,754 


2,061 


.044082 


10.97 


74.72 


42.39 


66 


44,693 


2,128 


.047614 


10.46 


78.85 


45.78 


67 


42,565 


2,191 


.051474 


9.96 


83.24 


49.49 


68 


40,374 


2,246 


.055630 


9.47 


87.91 


53.49 


69 


38,128 


2,291 


.060087 


9.00 


92.89 


57.78 


70 


35,837 


2,327 


.064933 


8.54 


98.20 


62.44 


71 


33,510 


2,351 


.070158 


8.10 


103.87 


67.46 


72 


31,159 


2,362 


.075805 


7.67 


109.91 


72.89 


73 


28,797 


2,358 


.081884 


7.26 


116.36 


78.73 


74 


26,439 


2,339 


.088468 


6.86 


123.25 


85.07 


75 


24,100 


2,303 


.095560 


6.48 


180.61 


91.89 


76 


21,797 


2,249 


.103179 


6.11 


138.49 


99.21 


77 


19,548 


2,179 


.111469 


5.76 


146.94 


107.18 


78 


17,369 


2,092 


.120444 


5.42 


155.98 


115.81 


79 


15,277 


1,987 


.130065 


5.09 


165.68 


125.06 


80 


13,290 


1,866 


.140406 


4.78 


176.10 


135.01 


SI 


11,424 


1,730 


.151436 


4.48 


187.32 


145.61 


32 


9,694 


1,582 


.163194 


4.18 


199.49 


156.92 


S3 


8,112 


1,427 


.175912 


3.90 


212.78 


169.15 


34 


6,685 


1,268 


.189678 


3.63 


227.42 


182.38 


35 


5,417 


1,111 


.205095 


3.36 


243.73 


197.21 


36 


4,306 


958 


.222480 


3.10 


262.03 


213.92 


37 


3,348 


811 


.242234 


2.84 


282.69 


232.92 


38 


2,537 


673 


.265274 


2.59 


306.23 


255.07 


39 


1,864 


545 


.292382 


2.35 


333.15 


281.14 


90 


1,319 


427 


.323730 


2.11 


363.90 


311.28 


91 


892 


322 


.360987 


1.89 


399.27 


347.10 


92 


570 


231 


.405263 


1.67 


439.95 


389.68 


93 


339 


155 


.457227 


1.47 


486.07 


439.64 


94 


184 


95 


.516304 


1.28 


537.29 


496.45 


95 


89 


52 


.584270 


1.12 


592.71 


561.80 


96 


37 


24 


.648640 


.99 


645.62 


623.70 


97 


13 


9 


.692308 


.89 


693.08 


665.68 


98 


4 


3 


.750000 


.75 


767.74 


721.15 


99 


1 


1 


1.000000 


.50 


961.54 


961.54 



244 



TABLE No. 17. 

American Experience Table of Mortality. 













Net Premiums. 




Number 


Deaths 


Per cent, of 
deaths to 


Expectation 


American — 4 per cent. 


Age. 


Level Ann. 


Natural 




living. 


each year. 


the living. 


of life. 


Prem. to in- 
sure #T,000 
for life. 


Pr'm. to in- 
sure $1000 
one year. 

Col. 6. 




Col. i. 


Col. 2. 


Col- 3 . 


Col. 4. 


Col. 5- 


10 


100,000 


749 


.007490 


48.72 


10.53 


7.20 


11 


99,251 


746 


.007516 


48 08 


10.70 


7.23 


12 


98,505 


743 


.007543 


47.45 


10.88 


7.25 


13 


97,762 


740 


.007569 


46.80 


11.06 


7.28 


14 


97,022 


737 


.007596 


46.16 


11.26 


7.30 


15 


96,285 


735 


.007634 


45.50 


11.47 


7.34 


16 


95,550 


732 


.007661 


44.85 


11.69 


7.37 


17 


94,818 


729 


.007688 


44.19 


11.91 


7.39 


18 


94,089 


727 


.007727 


43.53 


12.15 


7.43 


19 


93,362 


725 


.007765 


42.87 


12.40 


7.46 


20 


92,637 


723 


.007805 


42.20 


12.67 


750 


21 


91,914 


722 


.007855 


41.53 


12.95 


7-55 


22 


91,192 


721 


.007906 


40.85 


13.24 


7-60 


23 


90,471 


720 


.007958 


40.17 


13.55 


765 


24 


89,751 


719 


.008011 


39.49 


13.87 


7-70 


25 


89,032 


718 


.008065 


38.81 


14.21 


7*75 


26 


88,314 


718 


.008130 


38.12 


14.57 


7.82 


27 


87,596 


718 


.008197 


37.43 


14.95 


7.88 


28 


86,878 


718 


.008264 


36.73 


15.35 


7.95 


29 


86,160 


719 


.008345 


36.03 


15.77 


8.02 


30 


85,441 


720 


.008427 


35.33 


16.21 


8.10 


31 


84,721 


721 


.008510 


34.63 


16.68 


8.18 


32 


84,000 


723 


.008607 


33.93 


17 18 


8.28 


33 


83,277 


726 


.008718 


33.21 


17.70 


8.38 


34 


82,551 


729 


.008831 


32.50 


18.26 


8.49 


35 


81,822 


732 


.008946 


31.78 


18.84 


8.60 


36 


81,090 


737 


.009089 


31.07 


19.46 


8.74 


37 


80,353 


742 


.009234 


30.35 


20.12 


8.88 


38 


79,611 


749 


.009408 


29.62 


20.82 


9.05 


39 


78,862 


756 


.009586 


28.90 


21.57 


9.22 


40 


78,106 


765 


.009794 


28.18 


22.35 


9.42 


41 


77,341 


774 


.010008 


27.45 


23.19 


9.62 


42 


76,567 


785 


.010252 


26.72 


24.08 


9.86 


43 


75,782 


797 


.010517 


26.00 


25.03 


10.11 


44 


74,985 


812 


.010829 


25.27 


26.04 


10.41 


45 


74,173 


828 


.011163 


24.54 


27.12 


10. 73 


46 


73,345 


848 


.011562 


23.81 


28.27 


11.12 


47 


72,497 


870 


.012000 


23.08 


29.50 


11.54 


48 


71,627 


896 


.012509 


22.36 


30.81 


12.03 


49 


70,731 


927 


.013106 


21.63 


32.21 


12.60 


50 


69,804 


962 


.013781 


20.91 


33.70 


13.25 


51 


68,842 


1,001 


.014541 


20.20 


35.29 


13.98 


52 


67,841 


1,044 


.015389 


19.49 


36.98 


14.80 



TABLE NO. 17. —Continued. 

American Experience Table of Mortality. 



245 



Number 
living. 



Col i. 

66,797 

65,706 

64,563 

63,364 

62,104 

60,779 

59,385 

57,917 

56,371 

54,743 

53,030 

51,230 

49,341 

47,361 

45,291 

43,133 

40,890 

38,569 

36,178 

33,730 

31,243 

28,738 

26,237 

23,761 

21,330 

18,961 

16,670 

14,474 

12,383 

10,419 

8,603 

6,955 

5,485 

4,193 

3,079 

2,146 

1,402 

847 

462 

216 

79 

21 

3 



Deaths 

each year. 



Col, 2. 
1,091 

1,143 

1,199 

1,260 

1,325 

1,394 

1,468 

1,546 

1,628 

1,713 

1,800 

1,889 

1,930 

2,070 

2,158 

2,243 

2,321 

2,391 

2,448 

2,487 

2,505 

2,501 

2,476 

2,431 

2,369 

2,291 

2,196 

2,091 

1,964 

1,816 

1,648 

1,470 

1,292 

1,114 

933 

744 

555 

385 

246 

137 

58 

18 

3 



Per cent, of 

deaths to 
the living. 



Col. 3 . 

.016333 
.017396 
.018571 
.019885 
.021335 
.022936 
.024720 
.o26693 
.028880 
.031292 
.033943 
.036873 
.040129 
.043707 
.047647 
.052002 
.056762 
.061993 
.067665 
.073733 
.080178 
.087028 
.091371 
.102311 
.111064 
.120827 
.131734 
.144466 
.158605 
.174297 
.19 J 561 
.211359 
.235552 
.265681 
.303020 
.346692 
.395863 
.454545 
.532466 
.634259 
.734177 
.857143 
1.000000 



Expectation 
of life. 



Col 4. 

18.79 

18.09 

17.40 

16.72 

16.05 

15.39 

14.74 

14.10 

13.47 

12.86 

12.26 

11.67 

11.10 

10.54 

10.00 

9.47 

8.97 

8.48 

8.00 

7.55 

7.11 

6.68 

6.27 

5.88 

5.49 

5.11 

4.74 

4.39 

4.05 

3.71 

3.39 

3.08 

2.77 

2.47 

2.18 

1.91 

1.66 

1.42 

1.19 

.98 

.80 

.64 

.50 



Net Premiums. 
American — 4. P er cent. 



Level Ann. 
Prem. to in- 
sure $1,000 
for life. 



Col. S . 

$38.79 

40.73 

42.79 

45.00 

47.35 

49.87 

52.57 

55.45 

58.54 

61.84 

65.39 

69.18 

73.25 

77.61 

82.28 

87.29 

92.65 

98.39 

104.54 

111.13 

118 21 

125.85 

134.14 

143.19 

153.13 

164.11 

176-30 

189.87 

204.95 

221.82 

240.90 

262.88 

288.60 

318.81 

354.03 

394.52 

441.22 

497.08 

566.27 

649.34 

736.31 

840.75 

961.54 



Natural 
Pr'm. to in- 
sure $iooo 
one year. 

Col. 6 

$15.71 

16.73 

17.86 

19.12 

20.52 

22.05 

23.77 

25.67 

27.77' 

30.09 

32.64 

35.46 

38.59 

42.03 

45.82 

50.00 

54.58 

59.61 

65.07 

70.81 

77.09 

83.68 

90.74 

98.38 

106.79 

116.18 

126.67 

138.91 

152.89 

167.59 

184.19 

203.23 

226.49 

255.46 

291.37 

333.36 

380.64 

437.06 

511.98 

609.86 

705.94 

824.18 

961.54 



246 



TABLE No. 18. 



Constructed from the American Experience Table of 
Mortality, showing the chances, at a given age, of dy- 
ing within a specified number of years thereafter. 





s -a 


8-g 


O'S 


3-1 


8-9 


§•§ 




MJ3 . 


h -C . 


H.C . 


H^2 . 


m43 . 


M M . 




•2 *S 


• s * S3 






C £ j_ 




Age. 




8#fc 


ggg 


(5 W>£ 


<3 **>£ 






Chan 
ofdyi 

10 


IS* 


|5« 


Chan 
ofdyi 

25 


u<3 


Chan 

ofdyi 

35 


20~ 


7.77 


11.67 


15.69 


19.93 


24.65 


30.31 


25 


8.10 


12.27 


16.67 


21.60 


27.48 


34 95 


26 


8.18 


12.43 


16.95 


22.05 


28.25 


36.20 


27 


8.27 


12.59 


17.24 


22.55 


29.10 


37.51 


28 


8.37 


12.77 


17.55 


23.11 


30.04 


38.96 


29 


8.47 


12.97 


17.91 


23.74 


31.08 


40.54 


30 


8.59 


13.19 


18.30 


24.43 


32.21 


42.25 


31 


8.71 


13.43 


18.74 


25.21 


33.46 


44.10 


32 


8.85 


13.69 


19.24 


26.07 


34.83 


46.08 


33 


9.00 


13.99 


19.79 


27.02 


36.32 


48.21 


34 


9.17 


14.32 


20.41 


28.06 


37.94 


50.47 


35 


935 


14.69 


21.09 


29.22 


39.70 


52.86 


36 


9.55 


15.10 


21.86 


30.48 


41.59 


55.39 


37 


9.78 


15.57 


22.71 


31.87 


43.63 


58.02 


38 


10.03 


16.10 


23.66 


33.39 


45.82 


60.76 


39 


10.31 


16.68 


24.70 


35.04 


48.15 


63.56 


40 


10.63 


17.34 


25.85 


36.83 


50.62 


66.41 


41 


10.99 


18.07 


27.11 


38.76 


53.22 


69.28 


42 


11.40 


18.89 


28.50 


40. 85 


55.95 


72.14 


43 


1186 


19.80 


30.02 


43.08 


58.77 


74.99 


44 


12.37 


20.80 


31.68 


45.47 


61.68 


77.77 


45 


12.96 


21.92 


33.48 


48.00 


64 63 


80.49 


46 


13.61 


22.14 


35.43 


50.67 


67.60 


83.12 


47 


14.34 


24.49 


37.53 


53.47 


70.58 


85.63 


48 


15.15 


25.96 


39.78 


56.38 


73.53 


87.99 


49 


16.04 


27.58 


42.19 


59.37 


76.43 


90.17 


50 


17.03 


29.32 


44.75 


62.41 


79.26 


92.14 


51 


18.12 


31.20 


47.45 


65.48 


82.01 




52 


19.31 


33.24 


50.28 


68.56 


84.64 




53 


20.61 


35.43 


53.23 


71.61 


87.14 




54 


22.03 


37.77 


56.26 


74.63 


89.41 




55 


23.58 


40.26 


59.36 


77.58 


91.50 




56 


25.26 


42.91 










57 


27.07 


45.69 










58 


29.03 


48.60 










59 


31.14 


51.61 










60 


33.41 


54.70 




i 







38.39 
41.08 
43.90 
46.83 
49.83 
52.90 
56.05 
59.15 
62.40 



Explanation. — At age 40, what are the 
chances of living 20 years longer ? By looking 
under the heading "Chances in 100 of dying 
within 20 years," at the right of age 40, there will 
be found 25.85. Subtracting this from 100 leaves 
74. 15 A little more than 74 chances in a hundred 
to live, and a trifle less than 26 chances to die, in 
the next 20 years, and similarly with reference 
to any other age or time. 



TABLE No. 19. 



247 



Age. 


Reserve Accumulations. 


Face value of 


Insurance at 




Actuaries 4 per cent. 


policy. 


risk. 




Col 


. i. 


Col. st. 


Col. 3. 


36 


End 1st year. 


$114.81 


$10,000 


$9,885.19 


37 


" 2d " 


233.38 


10,000 


9,766.62 


38 


" 3d " 


355.90 


10,000 


9,644.10 


39 


" 4th " 


482.47 


10,000 


9,517.53 


40 


" 5th " 


613.38 


10,000 


9,386.62 


41 


" 6th " 


748.56 


10,000 


9,251:44 


42 


" 7th " 


888.43 


10,000 


9,111.57 


43 


" 8th " 


1,032.89 


10,000 


8,967.11 


44 


" 9th " 


1,181.60 


10,000 


8,818.40 


45 


" 10th " 


1,334.12 


10,000 


8,665.88 


46 


" 11th " 


1,490.16 


10,000 


8,509.84 


47 


" 12th " 


1,649,17 


10,000 


8,350.83 


48 


" 13th " 


1,811.06 


10,000 


8,188.94 


49 


" 14th " 


1,975.65 


10,000 


8,024.35 


50 


" 15th « 


2,143.00 


10,000 


7,857.00 


51 


" 16th " 


2,312.84 


10,000 


7,687.16 


52 


" 17th " 


2,484.97 


10,000 


7,515.03 


53 


" 18th l( 


2,959.22 


10,000 


7,340.78 


54 


(< 19th « 


2,835.41 


10,000 


7,164.59 


55 


" 20th f< 


3,013.47 


10,000 


6,986.53 


56 


" 21st " 


3,193.20 


10,000 


6,806.80 


57 


<f 22d " 


3,374.33 


10,000 


6,625.67 


58 


(i 23d " 


3,556.89 


10,000 


6,443.11 


59 


" 24th " 


3,740.63 


10,000 


6,259.37 


60 


" 25th " 


3,925.28 


10,000 


6,074.72 


61 


" 26th " 


4,110.22 


10,000 


5,889.78 


62 


" 27th " 


4,295.20 


10,000 


5,704.80 


63 


" 28th " 


4,479.76 


10,000 


5,520.24 


64 


" 29th i( 


4,663.63 


10,000 


5,336.37 


65 


l< 30th i( 


4,846.38 


10,000 


5,153.62 


66 


(i 31st " 


5,027.75 


10,000 


4,972.25 


67 


11 32d " 


5,207.18 


10,000 


4,972.82 


68 


" 33d " 


5,384.50 


10,000 


4.615.50 


69 


" 34th " 


5,559.47 


10,000 


4,440.53 


70 


" 35th ff 


5,732.01 


10,000 


4,267.99 


75 


i( 40th ' f 


6,550.10 


10,000 


3,449.90 


80 


<( 45th " 


7,281.49 


10,000 


2,718.51 


100 


'• 65th " 


10,000.00 


10,000 


0,000.00 



218 



TABLE NO. 19.— Continued. 



I Per cent, 
of reserve. 



Col. 4. 

$1.15 
2.33 
3.56 
4.82 
6.13 

7.49 

8.88 

10.33 

11.82 

13.34 

14.90 
16.49 
18.11 
19.76 
21.43 

23.13 

24.85 
26.59 
28.35 
30.13 

31.93 
33.74 
35.57 
37.41 
39.25 

41.10 
42.95 
44.80 
46.64 
48.46 

50.28 
52.07 
53.85 
55.59 
57.32 

65.50 

72.81 
100.00 



2 per cent, 
of reserve. 



Col. 5. 

$2.30 
4.66 
7.12 
9.64 

12.26 

14.98 
17.76 
20.66 
23.64 
26.68 

29.80 
32.98 
36.22 
39.52 
42.86 

46.26 
49.70 
53.18 
56.70 
60.26 

63.86 
67.49 
71.13 

74.81 
78.50 

82.20 
85. 9o 
89.59 
93.27 
96.92 

100.55 
104.14 
107.69 
111.19 
114.64 

131.00 
145.62 
200.00 



3 per cent, 
of reserve. 



Col. 6. 

$3.45 
6.99 
10.68 
14.46 
18.39 

22.47 
26.64 
30.99 
35.46 
40.02 

44.70 
49.47 
54.33 
59.28 
64.29 

69.39 

74.55 

79.77 
85.05 
90.39 

95.80 
101.23 
106.70 
112.21 
117.75 

123.31 

128.86 
134.39 
139.90 
145.38 

150.83 
156.21 
161.53 
166.78 
171.96 

196.50 
218.43 
300.00 



4 per cent, 
of reserve. 



Col. 7. 

$4.60 

9.32 

14.24 

19.28 

24.52 

29.96 
35.52 
41.32 

47.28 
53.36 

59.60 
65.96 

72.44 
79.04 
85.72 

92.52 

99.40 
106.36 
113.40 
120.52 

127.73 
134.97 
142.27 
149.62 
157.00 

164.41 
171.81 
179.19 
186.54 
193.84 

201.11 
208.28 
215.38 
222.37 

229.28 

262.00 
291.24 
400.00 



ADDENDA. 249 



ADDENDA. 

Note 1. The only difference in effect, concerning cash sur- 
render values of policies issued by Massachusetts Companies, 
between the Massachusetts Insurance law of 1880 (see pages 71 
and 72) and the law of 1887 hereunto appended, is, that under the 
former law there was a difference of opinion as to whether the 
holder of a policy — except industrial policies— could demand the 
cash surrender value of the same when there were minor or de- 
pendent children; the latter law gives the holder of any and all 
forms of policies the right to demand cash surrender values on 
any anniversary after two full annual premiums shall have been 
paid thereon. The law of 1887 also gives the Massachusetts 
Companies the right to deduct five per cent, from the surrender 
value of all endowment policies, this right however, has been 
and is being waived, wholly or in part, by most of the Companies 
of that State. 

EXTRACT FROM THE MASSACHUSETTS INSURANCE ACT OP 1887. 

Sect. 76. All policies hitherto issued by any domestic life 
insurance company* shall be subject to the provisions of law ap- 
plicable and in force at the date of such issue. No policy of life 
or eodowment assurance hereafter issued by any such company 
shall become forfeit or void for non-payment of premium after 
two full annual premiums, in cash or note, or both, have been 
paid thereon; but in case of default in the payment of any subse- 
quent premium, then, without any further stipulation or act, such 
policy shall be binding upon the company for the amount of paid- 
up insurance which the then net value of the policy and all divi- 
dend additions there on, computed by the rule of section eleven, 
less any indebtedness to the company on account of said policy, 
and less the surrender charge provided herein, will purchase as a 
net single premium for life or endowment insurance maturing or 
terminating at the time and in the manner provided in the orig- 
inal policy contract; and such default shall not change or effect 
the conditions or terms of the policy, except as regaids the pay- 
ment of premiums and the amount payable thereon. Said sur- 
render charge shall be eight per cent of the insurance value of the 
policy at the date of default, which insurance value is the present 
value of all the normal future yearly costs of insurance which by 

* — Section i of this law says "the word 'domestic' designates those 
companies incorporated or formed in this Commonwealth." 



250 ADDENDA. 

its terms said policy is exposed to pay in case of its continuance, 
computed upon the rate of mortality and interest assumed in 
section eleven [''Combined Experience'' or "Actuaries' Table" 
rate of mortality with interest at the rate of four per cent, per 
annum.] Every such policy, after the payment of two ful 
annual premiums thereon, shall have a surrender value which 
shall be its net value, less the surrender charge, and less any in- 
debtedness to the company on account of the said policy, and its 
holder may, upon any subsequent anniversary of its issue, sur- 
render the same and claim and recover from the company such 
surrender value in cash: Provided, that from the surrender value 
of all endowment policies the company may deduct five per cent. 
* # * * # # Upon surrender, on any anniversary of its 
issue, of a policy which has become paid up after the payment of 
two full annual premiums, by force of the statute upon default 
in payment of premium, the holder shall be entitled to its net 
value, payable in cash: provided, that from such net value of all 
endowment policies the company may deduct five per cent. But 
no surrender of a policy shall be made without the written assent 
of the person to whom the policy is made payable. Any condi- 
tion or stipulation in the policy or elsewhere, contrary to the 
provisions of this section and any waiver of such provisions by 
the assured, shall be void. 



INDEX. 

Page 

Abstract of Net Values — Uses to the Insured 53 

Accumulations — Explanation ot . . 22 

Actuary — Definition of : 22 

Actuaries' Table of Mortality — By whom Constructed 20 

Addenda -. 249 

^Etna Life Insurance Company — Table 103 

American Table of Mortality — By whom Constructed 21 

Anecdotes — With Reference to Mortality 66 

Assessment System in General — Its Distinguishing Character- 
istics — Requisites for Soundness and Permanency 157-162 

Assessment System as Operated by- — 

(1) Fidelity Mutual Life Association 162-187 

(2) Harper Plan, The 188-195 

(3) Bankers' Life Association of Des Moines 195-198 

Assets 23 

Brokerage — Definition of 23 

Berkshire Life Insurance Company — Letter from the— With Re- 
ference to the Law oi 1880 78 

Table . o 104 

Commissions — Definition of 24 

Committee — Names of, to Investigate Tontine Insurance 42 

Committee — Report of — On Tontines 42 

Committee — Extracts from Evidence Taken Before — On Ton- 
tines 46-52 

Company — Life Insurance 24 

(1) Stock Company 24 

(2) Mutual Company „ . 24 

(3) Mixed Company 24 

Companies — Assessment 157-198 

(1) Fidelity Mutual Life Association 162-187 

(2) Mutual Reserve Fund Life Association 188-195 

(3) Bankers' Life Association of Des Moines 195-198 

Companies — Classification of ... .71-102 

Class A 71-83 

Class B . . . . 84-93 

Class C 94-102 

Companies — Level Premium 103-128 

./Etna 103 

Berkshire 104 

Connnecticut Mutual 105 

Equitable k 6 



252 INDEX. 

Companies — Level Premium — Concluded. 

Germania 107 

Home 108 

Manhattan , 109 

Massachusetts Mutual no 

Michigan Mutual 1 11-1 12 

Mutual Benefit 113 

Mutual Life , 114 

National 115 

New England . . . 116 

New York Life 117 

Northwestern 118 

Penn Mutual 119 

Phoenix Mutual 120 

Provident L. and T 121 

State Mutual 122 

Travelers 123 

Union Central 124-125 

Union Mutual 126 

United States 127 

Washington 128 

Companies — Natural Premium — 

Kansas Mutual Life Association 148-150 

Life Indemnity and Investment Company. 150-155 

Provident Savings Life Assurance Society. 142-47 

Companies —Tontine — Doing Business in Ohio. . , 43 

Connecticut Mutual Life Insurance Company, Table 105 

Contents by Chapters. 4-6 

Dividend Accumulations 22 

Dividends — Contribution System of 25 

Reversionary 25 

Dividends — Sources of 65-7° 

(1) From Savings of Interest 65 

(2) From Savings of Mortality 66 

(3) From Savings of Expenses 67 

* (4) From Lapses and Forfeitures 68 

(5) From Cash Surrender Values 69 

(6) From Changes 7° 

Endowment Insurance 32-38 

Endowment Premiums — Analyzed ... 34 

Endowments— Matured — Examples of 35 

Age 39 to 55 — Dividends Used , 35 

Age 39 to 49— Dividends Used. 36 

Age 40 to 45 — Dividends Used - - v. 36 

Age 37 to 55 — Dividends Used 37 

Age 40 to 60 — Dividends Used 37 



INDEX. 253 

Endowments — Matured — Examples of — Concluded, 

Age 22 to 35 — Ten Annual Payments — Dividends Used to 

Purchase Additions 38 

Age 35 to 45 — Dividends Used to Purchase Additions 38 

Endowment — Semi. . . 38 

Equitable Life Assurance Society — Testimony of, etc 46-49 

Table 106 

Expectation of Life 26 

Expenses — Life Insurance — 

(1) Compared with those of Fire Insurance and Railroad 

Corporations '. . . ..- 56 

(2) Ratio of — To Premiums on Gross Receipts 57 

(3) Ratio of — To Net Insurance Claims Paid — a New Test 57 

Expense Element of a Premium. 64 

Failures — Life Insurance 54 

Fidelity Mutual Life Association /.' 162-187 

Author of the Plan 162 

Annual Rates for $1000 Insurance, Including Expense 

Charge 182 

Corporate Powers — By Law, etc 183 

Equation Rate of Fouse Plan 176-178 

Explanation and Application of Table 3 169 

Foundation Principles 163-164 

Notation — Tables of Formulae — Examples Illustrating the 

Uses of Formulae .178-181 

Proof of Sufficiency of Rates — "With Tables 1, 2, 3. . . . .164-169 

Table 5 — Explanation of Same 171-176 

Fire Insurance — Definition of 17 

Forfeiture — Definition of 26 

Germania Life Insurance Company, Table 107 

Home Life Insurance Company, Table 108 

Insurance — Fire — Definition of 17 

Life — Definition of 17 

Life and Fire Compared 17 

Insurance at Risk in Level Premium System Compared with In- 
surance at risk in the Natural Premium System 134-137 

Interest — History of — Table, etc 205-207 

Interest Laws of the States 208 

Introduction 7-15 

Iowa Life Insurance Law, 1873 96-97 

(1) Amended 154-155 

John Hancock Mutual Life Insurance Company — Letter From 

— With Reference to the Law of 1880 77 

Kansas Mutual Life Association, Hiawatha, Kan 148-150 

Lapse — Definition of 26 

Lapses and Forfeiture — Statistics with Reference to 67-69 

Law of Mortality 19 



2°4 INDEX. 

Legal Reserve in the Level Premium System Compared with the 

Legal Reserve in the Natural Premium System 132-137 

Level Premium — Analysis of a 5 9-70 

Level Premium Compared with Natural Premium .......... 132-137 

Level Premium Companies — 

Class A 71 

Class B 84 

Class C 94 

Tables 103-128 

Level Premium System 59-128 

Liability — Policy 23 

Total 23 

Life Insurance — Definition of 17 

Unanswerable Arguments for 17-19 

Life Indemnity and Investment Company 150-155 

(1) Distribution of Surplus 151 

(2) Full Text of Policy— Face and Back— Table of 

Rates 151-154 

(4) Insurance Law s 154-155 

Investment Bond — Assumed Example of Twenty Year Bond 154 

Loading — Definition of . . . 26 

Loss — Definition of 26 

Maine Non-Forfeiture Law, 1877 — with Assumed Example Il- 
lustrating the Same 84 

Man — As Productive Property — Why He Should be Insured. . . 17 

Manhattan Life Insurance Company, Table. 109 

Massachusetts Non-Forfeiture Law, 1880 71 

Massachusetts Assessment Law, 1885 — Abstract of the 199 

Massachusetts Mutual Life Insurance Company — Letter from the 

— With Reference to Law of 1880 75 

Table. ./. no 

McCall, Jr., Hon. Jno. A. — Remarks of — On Co-operative 

Business 202 

Michigan Non-Forfeiture Law of 1881 — With Assumed Example 

Illustrating the Same 86-91 

Michigan Mutual Life Insurance Company — Brief Statement — 

Table 111-112 

Mixed Company — Definition of 24 

Mortality — Definition ol 26 

Law of 19 

Mortality Tables — How Constructed . . 20-21 

Mortality Element of a Premium 63-64 

Mutual Company — Definition of . . . , 24 

Mutual Benefit Life Insurance Company, Table 113 

Mutual Life Insurance Company, Table 114 

National Banks 38 

National Life Insurance Company, Table ....... 115 



INDEX. 255 

Natural Premium— Analysis of the 130 

Natural Premium — Compared with Level Premium 132-137 

Natural Premium System in General 129-142 

Natural Premium System, as Operated by — 

(1) Kansas Mutual Life Association 148-150 

(2) Life Indemnity and Investment Company 150-155 

(3) Provident Savings Life Assurance Society of New 

York 142-147 

New England Mutual Life Insurance Company — Letter from — 

— With Reference to the Law of 1880 74 

Table 116 

New York Life Insurance Company — Testimony, etc 49~52 

Table .... 117 

New York Life Insurance Law . 94 

Northwestern Mutual Life Insurance Company — Table 118 

Penn Mutual Life Insurance Company— Table 119 

Phoenix Mutual Life Insurance Company — Table 120 

Policy— Liability 23 

Definition of 27 

Single-Payment — With Example 27 

Five-Payment Life — With Example. 27 

Ten-Payment Life — With Example 28 

Fifteen-Payment Life 29 

Twenty-Payment Life 29 

Ordinary Life — With Example 29 

Term Life , 30 

Renewable Term Life 30 

Quarterly Renewable Term Life 30 

Policies — Assumed Examples of — Illustrating the Massachusetts 

Non-Forfeiture Law of 1880 78-83 

Policies— Examples of — Issued by a Company in Class C 95-96 

(1) Matured Endowment, 26 to 45 95 

(2) Matured Endowment, 25 to 40 96 

(3) Matured Endowment, 25 to 35 ... 96 

Policies — Examples of — Illustrating the Iowa Law of 1873. . . .97-98 
Premium — Definition of 52 

(1) Expense Element 64 

(2) Mortality Element 63 

(3) Reserve Element 61 

Premium Notes „ . . . 52 

Provident Life and Trust Company — Table 121 

Provident Savings Life Assurance Society of New York. . . .142-147 

(1) Renewable Term Policies 142-145 

(2) Insurance Bonds 145-147 

Renewable Term Insurance — Rates, etc , . .91-93 

Reserve Accumulation 22 

Reserve — Definition '. . 53 



256 INDEX. 

Reserve Element of a Premium B 61-63 

Reversionary Dividends 25-26 

Semi-Endowment Policies 38 

Semi-Tontine Insurance 39-42 

Senate Resolution, No. 100 42 

State Mutual Life Assurance Company — -Letter From — With 

Reference to the Law of 1880 75 

Table 122 

Stock Company — Definition of 24 

Surplus — Definition of 53 

Tables — Nos. 1 to ig Inclusive. 214-248 

Tabor, Mervin — Letters from 72-73 

(1) To Hon. Elizur Wright 73 

(2) To the Massachusetts Companies 73 

Tontine Insurance 39-42 

Tontine Insurance — Fully Analyzed — Illustrated by Matured 

Policies. . . . 98-102 

Travelers Insurance Company— -Table 123 

Uniform per centum Loading not Equitable, as shown by Table 

C, with Explanatory Notes 138-141 

Union Central Life Insurance Company — Table 124 

Illustration of Life-Rate Endowment Policy 125 

Union Mutual Life Insurance Company — Table 126 

United States Life Insurance Company — Table 127 

Value of a Policy — Net 53 

Washington Life Insurance Company — Table 12S 

Williams, Hon. Ephraim — Remarks of — On Assessment Insur- 
ance 204 

Wright, Hon. Elizur — Letter from— With Reference to Massa- 
chusetts Law of 1880 . 73 



0061 01 d3S 



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